Nevada has been a favored place to transact business as an income tax-free state. That all ended on June 10, 2015, when Governor Sandoval signed a bill enacting a new “Commerce Tax” applicable to each “business entity” with Nevada gross revenue exceeding $4,000,000 in a taxable year.
The Nevada Commerce Tax is a gross revenue tax subject to specific statutory exceptions including income from intangibles. The tax is applied to revenue over $4,000,000. Nevada gross revenue is generally measured by market-based sourcing.
The applicable tax rate varies depending upon the industry category in which the business entity is “primarily engaged.” Tax rates range from .051% for mining to .331% for railroads, so classification of industry type will be important.
The tax applies on an entity-by-entity basis on “each business entity whose ‘Nevada gross revenue’ in a taxable year exceeds $4,000,000.” For this purpose, the term “business entity” is defined to include a “corporation, partnership, proprietorship, limited liability company, business association, joint venture, limited liability partnership, business trust, professional association, joint stock company, holding company and any other person engaged in business.” This includes individuals who file Form 1040 Schedule C, E or F as well as single member LLCs.
Unlike your typical tax period, Nevada Commerce Tax is based on a fiscal year of July 1 to June 30th with tax report due on August 14th, so businesses will need to track revenue on that basis.
By Melinda Nelson, CPA