Nevada Commerce Tax

By Blake Larum, Senior Tax Manager

Senate Bill No. 483 was enacted into law on June 10, 2015. The tax is effective on July 1, 2015 for business entities with Nevada annual gross revenue in excess of $4 million. Gross revenue is defined as the total amount of revenue a business entity recognizes that contributes to the production of gross income exclusive of cost of goods sold and other expenses.

Most business entities are subject to the tax, including corporations, partnerships, LLC’s, joint ventures, and individuals that are required to file a Federal Schedule C (Profit of Loss from Business). Real estate investment trusts (REIT’s) are excluded from the definition of taxable business entities, with certain exceptions.

The taxable year for commerce tax returns is July 1st through June 30th for all taxpayers. The returns are due 1 ½ months following the end of the taxable year. The first commerce tax returns and payments will be due August 15, 2016. A 30-day extension can be requested, which would extend the due date to September 15, 2016. This coincides with the extended Federal due date for calendar year entity tax returns (re: corporations, s-corps, partnerships, LLC’s).

Income Sourced to Nevada

To determine the income sourced to Nevada for various revenue streams, please see general guidelines below:

  • Rents and royalties from real property located in Nevada.
  • Revenue from the sale of real property located in Nevada.
  • Rents and royalties from tangible personal property to the extent the tangible personal property is located or used in Nevada.
  • Revenue from the sale of tangible personal property if the property is delivered or shipped to a buyer in Nevada, regardless of the F.O.B. point or any other condition of sale.
  • Revenue from the sale of transportation services if both the origin and the destination points of the transportation are located in Nevada.
  • Revenue from the sale of other services in the proportion of the purchaser’s benefit in Nevada. The physical location where the purchaser ultimately uses or receives the benefit of the service is paramount in determining the proportion of the benefit in Nevada. If the taxpayer cannot determine that location, the taxpayer may use an alternative method to situs gross revenue, with certain conditions.
  • Revenue not otherwise described if the gross receipts are from business conducted in Nevada. The physical location of the purchaser is paramount in determining if business is conducted in Nevada. If the taxpayer cannot determine that location, the gross revenue must not be considered to be from business conducted in Nevada.

Tax Calculation

In order to calculate the amount of Nevada Commerce Tax you subtract $4 million from the Nevada source income of an entity for the taxable year and multiply that amount by the rate set forth in the act. The tax rate varies from 0.051 percent to 0.331 percent, depending on the industry in which the business entity is engaged. For instance, if a business had $5M of Nevada source income and is subject to the 0.331 percent tax. The tax for year would be ($5 million – $4 million) x 0.331% = $3,310.

Businesses subject to the commerce tax will be allowed a credit against the modified business tax (MBT) equal to 50 percent of their commerce tax liability. The credit toward the MBT may be used only in the same fiscal year the commerce tax was paid.

For further details about the Nevada Commerce Tax and/or how it will potential impact your business, please feel free to contact us.