Nevada imposes a new commerce tax on businesses with Nevada gross revenue exceeding $4 million and creates nexus rebuttable presumptions for sales and use tax purposes.
On May 27, 2015 and June 9, 2015, Nevada Governor Brian Sandoval (R) signed into law Assembly Bill 380 (“A.B. 380”) and Senate Bill 483 (“S.B. 483”), respectively. S.B. 483 imposes a gross receipts tax (the “Commerce Tax”) on a business entity with Nevada gross revenue exceeding $4 million. In addition, S.B. 483 increases the business license fee to $500 for corporations and reverses the previously legislated fee decrease for all other businesses, makes the 2.6% Local School Support Tax permanent, extends the Net Proceeds of Minerals Tax prepayment requirement until June 30, 2016, and with respect to the Modified Business Tax, increases the tax rate and decreases the exemption amount for certain taxpayers. A.B. 380 subjects an out-of-state retailer to a rebuttable sales and use tax collection and remittance responsibility presumption where the retailer has a referral agreement with an in-state resident, or is a member of a controlled group and a component member of the group engages in an activity significantly associated with the retailer’s ability to establish and maintain a market in Nevada.
The “New” Commerce Tax
Imposition. Effective July 1, 2015, S.B. 483 imposes the Commerce Tax on the Nevada gross revenue of a business entity engaging in a business in the state that has Nevada gross revenue that exceeds $4 million during a taxable year. A taxable year for all purposes is a twelve (12) month period beginning on July 1 and ending on June 30.
Taxable Entities. A “business entity” for Commerce Tax purposes includes, among others, a corporation, partnership, sole proprietorship, limited liability company, and generally any other business entity engaged in business in the state. However, the following types of business entities are excluded from the tax: (i) governmental entities; (ii) organizations that qualify for exemption from federal income tax under Internal Revenue Code section 501(c); (iii) estates of natural persons and grantor trusts all of the grantors and beneficiaries of which are natural persons; (iv) certain real estate investment trusts (or REITs); (v) a limited liability company, partnership, or non-business trust that derives at least 90% of its federal gross income from certain investment activities and no more than 10% of its federal gross income from conducting an active trade or business; and (vi) a business entity that confines its in-state activities to the owning, maintenance and management of intangible investments, including stocks, bonds, patents, trademarks, and trade names.
Gross Revenue. “Gross revenue” for these purposes generally means the total amount realized by a business entity (without deduction for the cost of goods sold or other expenses incurred), including: (i) the fair market value of property or services received; (ii) the fair market value of debt forgiven or transferred; (iii) amounts realized from the performance of services; (iv) amounts realized from the sale, exchange, or other disposition of the business entity’s property; and (v) amounts realized from another person’s possession of the property or capital of a business entity.
Exclusions from Gross Revenue. The following, among others, may be excluded from “gross revenue:” (i) the value of cash discounts allowed by the business entity and taken by a customer; (ii) the value of goods or services provided to a customer on a complimentary basis; (iii) regardless of the federal income tax classification of the business entity, amounts realized from certain reorganization-type transactions; (iv) amounts realized from the sale, exchange, disposition or grant of the right to use a trademark, trade name, patent, copyright, or other similar intellectual property; (v) amounts indirectly realized from a reduction of an expense or deduction; and (vi) amounts that are not considered revenue under generally accepted accounting principles.
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This article originally appeared in BDO USA, LLP’s BDO Knows: SALT – July 2015. Copyright © 2015 BDO USA, LLP. All rights reserved. www.bdo.com.