Nevada Commerce Tax – Guide
There are many things that you need to take care of if your company is registered in Nevada. One of the main things is to pay your taxes on time and to adhere to the law. Starting a company in Nevada has always been a favorite of many entrepreneurs.
Nevada being a tax-free state has attracted many businessmen encouraging them to set up companies here. As a matter of fact, businesses that want to set up base out of their home state choose Nevada to incorporate because of the low filing fees and the absence of income taxes. But in recent times that has changed as in 2015 during a Legislative session a new law was formed. This is the Nevada Commerce Tax law.
Nevada Commerce Tax
The “Revenue Session” was dubbed into acknowledgement of the legislator about meeting the increasing budget demands before the 78th Nevada Legislative Session. Later in 2015 during a session the Commerce tax was introduced. Nevada Commerce Tax is a tax that is imposed on business owners that have the rights of a person to earn through a business that is registered in Nevada. Only those who have a gross income of $4 million and above a financial year are liable to pay this tax.
Also, there is no tax on personal income. The main aim of the government is not to impose tax on wages but on strong business revenues. According to the new Business tax (s Senate Bill 438), from the gross revenue of a company, a $4 million threshold allowed to be deducted when determining the Nevada commerce tax liability.
The $4 million mark is not the threshold for filing, which means that in Nevada businesses have to file the Commerce tax return. Unless the company is exempt from filing, they have to do so. Hence, if in a financial year a company earns less than the mark of $4 million, they will have to check a box in the form that indicates that they have an income less than the given threshold in the Nevada commerce tax return.
After doing so, this form will have to be submitted to the government. On the contrary, if a company’s income is more than the threshold they will have to go ahead and calculate the liability. For many businesses all the additional state taxes are burdensome. It is normal for businesses to be overwhelmed by it, but here are some unique aspects of the Nevada commerce tax:
- A financial year filing requirement
- On a separate entity, bases tax is imposed
- No deductions from the gross receipts virtually.
- The taxpayer funding is used for the potential state audit expenses
Business Entities subjected to Nevada Commerce Tax
Any person that engages or is conducting businesses within Nevada is subject to the business tax. Businesses entity are:
- A joint venture
- A joint-stock company
- A corporation
- A partnership
- Independent contractors
- A bank
- A Sole proprietorship
- A loan and saving association
- A business association
- A Professional association
- A limited liability company
- A limited liability partnership
- A holding company
- A business trust
- A proprietorship
- Individuals conducting real estates and royalties
- Or anyone who conducts business in Nevada, this also includes a normal person who files Schedule E, part 1 With their federal tax return.
Business Entities Exempted from Nevada Commerce Tax
There are organizations that do not have to file for the Nevada Commerce Tax, these entities that are not obligated to file for the tax are:
- Passive Entities
- Credit unions
- Grant trusts
- Government entities
- IRC 501(c), NRS 82 and NRS 84 non-profit organizations
- Certain Real estate Investment Trusts
- Business Entities Organized pursuant to NRS 82 or NRS 84
- Real Estate Mortgage Investment Conduits
- Entities that own and manage intangible assets ( patents, trademarks, bonds, stocks)
Gross revenue of Nevada Businesses
The Nevada commerce tax is applied to revenues that were situated in Nevada (i.e,. Revenue that originated from conducting business within Nevada). Gross revenues include:
- Revenue from transportation services in Nevada ( only if the transportation origin and destination points are located within Nevada).
- Revenue from royalties and rent from personal property ( If the property is allocated and used in Nevada).
- Revenue earned from the sale of personal property ( regardless of the origin, the property must be shipped or delivered to a buyer in Nevada).
- Revenue from sales, royalties, and rent of the real property ( if they are situated and located in Nevada).
A catchall provision for the gross revenue which is undetailed and broad is within the legislation, not otherwise described. Before the Department of Taxation on the 7th of July in 2015 at the initial hearing, “catchall” was the subject of significant discussion and as the Department forms its regulations on this tax it will be clarified.
Here are the deductions and exclusions from the gross revenue. No deduction is there from other expenses incurred or the cost of goods sold. Depending on the industry type the commerce tax varies, it is based on the NAICS code (North American Industry System). Your status is linked with the state as the NAICS code reports on your initial return. The unclassified rate ( 0.128%) will be applicable only if a suitable NAICS category can not be determined. The rate varies from 0.051% to 0.331%.
By taking the entire amount from engaging in business in Nevada ( no deduction for other expenses or cost of goods sold that were incurred during the operation of the business) the gross revenue is determined of a business entity. In Senate Bill 483, Section 8(3) revenue that will not be included as gross revenue will be found.
When is the tax due for the Nevada commerce tax?
The date that the commerce tax year runs is July 1 to June 30. Following the end of the tax year, returns are due for 45 days. Currently, there is no separate form for the application of an extension request, but an extension for a time period of 30 days is available if filed with a written request.
Based on the amount of unpaid tax, interests and penalties will be derived if a business fails to file or pay the Nevada commerce tax on time. There is a grace period till Feb 15 2017 for the first tax year to file and pay the tax. If there is a reasonable cause for being late the late charges and penalties may be waived off, if during the grace period the return is filed and the due amount is paid. (i.eThe failure to file and pay on time occurred despite the ordinary care exercised, all of which was not due to deliberate neglect or intentional purposes.
What is the NAICS code?
You might have seen us mention the NAICS code above. Let us understand that better. Pronounced as NAKES, It is a classification in the North American Industry Classification System. It was developed to analyze, collect, and publicate statistical information for the Federal Statistical Agencies in the US economy.
Initially, the SIC (Standard Industrial Classification) was used in alliance with the statistical agencies of Mexico and Canada. Then they adopted NAICS in 1997 to replace it. Based on a single economic concept, NAICS was developed as the first economics classification system. The main goal of this was to establish a North American Standard.
What are the industry tax rates of the Nevada commerce tax?
Nevada’s Economy is divided into 26 business categories in the new commerce tax. All of which are delineated under NAICS with each consisting of classifications of one or more industries. Ranging from 0.051% to 0.331% each category is given its own tax rate. The Nevada commerce tax rate is:
- Mining – 0.051%
- Air Transportation – 0.058%
- Agriculture – 0.063%
- Construction – 0.083%
- Manufacturing – 0.091%
- Wholesale trade – 0.101%
- Financial activities – 0.111
- Retail Trade – 0.111
- Unclassified – 0.128%
- Warehousing and Storage – 0.128
- Other Transportation – 0.129%
- Telecommunication/Utilities – 0.136%
- Management of companies – 0.137
- Other Services – 0.142%
- Administrative and Support Services – 0.154%
- Professional Services – 0.181%
- Health Services – 0.190%
- Food Services(includes restaurants) – 0.194%
- Accommodation – 0.200%
- Truck Transportation – 0.202%
- Arts, Entertainment, and Recreation – 0.240%
- Real Estate – 0.250%
- Publishing, Software, Data Processing – 0.253%
- Waste Management Services – 0.261%
- Educational Services – 0.281%
- Rail Transport – 0.331
Businesses that do not come under any classification are deemed as Unclassified Businesses and are taxed at 0.128%.
How can IncParadise Help you?
In Nevada, one of the leading incorporation service providers and registered agents is IncParadise. We can assist you in setting up your business in Nevada with additional services. Some services include obtaining DBA, EIN for business, Foreign qualification, etc. For more information visit us at IncParadise.
Disclaimer: We at IncParadise are not a CPA (Certified Professional Accountant) or a Tax expert and do not provide filing services. This article is for the general knowledge of people and not for professional advice. Kindly contact your lawyer if you need help with anything.
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