On June 10, 2015, Governor Brian Sandoval signed Senate Bill No. 483 enacting into law a Nevada commerce tax based on gross revenue. Gross revenue is the total amount of revenue a business entity recognizes that contributes to the production of gross income without deductions for the cost of goods sold or other expenses incurred.
Who Is Affected?
Effective July 1, 2015, business entities with Nevada annual gross revenue in excess of $4 million are subject to the tax.
Business entities include corporations, partnerships, LLCs, joint ventures, and individuals that are required to file a Federal Schedule C (Profit of Loss from Business). Real estate investment trusts (REITs) are excluded from the definition of taxable business entities, with certain exceptions.
Specific rules apply for allocating a business entity’s gross revenue to Nevada:
- Gross rents and royalties from real property are sourced to Nevada if the real property is located in Nevada.
- Gross revenue from the sale of tangible personal property is sourced to Nevada if the property is delivered to a buyer in Nevada.
- Gross revenue from the sale of services is sourced to Nevada to the extent the purchaser’s ultimate benefit is received in Nevada.
To calculate the amount of commerce tax to be paid, you subtract $4 million from the Nevada gross revenue 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.
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.
Dates to Keep in Mind
The taxable year for commerce tax returns runs from July 1 through June 30 for all taxpayers. The returns are due on or before the 45th day following the end of that taxable year. The first commerce tax returns and payments will be due August 15, 2016. Taxpayers may request a 30-day extension to pay the tax.
We're Here to Help
For more information about Nevada’s commerce tax or help determining what the implications are for your business, email statetax@mossadams.com.