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The Commerce Tax – How to Prepare

As most of you are probably aware, the Nevada Legislature approved and Governor Sandoval signed the new commerce tax into law effective July 1, 2015. If a “business entity” is engaged in business in Nevada with Nevada-sourced gross revenue over $4,000,000, the excess of that revenue over $4,000,000 is subject to the tax at various rates (.051 percent to .331 percent respectively). Though the estimate of businesses that will be impacted by this tax are somewhere around 10%, all businesses will be required to determine their Nevada-sourced revenue and fill out the form regardless.

More guidance will be coming from the Nevada Department of Taxation, and there are numerous exclusions from gross revenue as well as allowable deductions, but there are a few key takeaways that Nevada taxpayers should be thinking about now:

  1. The calculation is based on the tax year as defined in the law: July 1, 2015-June 30, 2016, regardless of whether or not that coincides with your fiscal year. Therefore, you need to ensure your accounting software can track the necessary information for that time period.
  2.  Since the tax is on Nevada-sourced revenue, if you have revenue sourced from other states you will need to ensure you are tracking that if not already doing so.
  3.  If your business operates within multiple categories or NAICS codes, there could be some difficulty in determining which category your business would fall into. As noted above, the tax rates vary substantially between the various 26 business categories.

The form is due 45 days from the end of the tax year, essentially August 14, 2016, though a 30 day extension can be requested. This is not a long turn around time so that is why planning for this new law needs to be happening now.

The new law also increased the Modified Business Tax from 1.17%to 1.475% for most businesses effective July 1, 2015, as well as reduced the exemption from $85,000 per quarter to $50,000. Make sure your payroll department or outsourced payroll company is aware of these changes.

Business license fees increased to a flat $500 for corporations as well as the law increased the initial and annual list for corporations with authorized stock by $25 for all fees.

If you have questions regarding the new law or need assistance, please contact us.

 





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Reno, NV 89501

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