Expert Advice - March 2004

Nevada State Tax Update

Gentlemen, Start Your Wallets!

by Jason A. Thomas

The Nevada State Legislature’s special session ending July 22, 2003 approved a variety of new taxes that will directly affect Nevada businesses. To help you decipher these changes and how they affect you, a synopsis of the major provisions of the new tax laws and how they are applied is given below.

The new tax laws remain subject to change, and if you have questions or need assistance, discuss your situation with your tax professional.

State Business License:

Effective July 22, 2003, all Nevada businesses, including sole proprietorships and companies formed for estate-planning and asset-protection purposes, are required to obtain a state business license and pay an annual state business license fee of $100. Current business license holders pay the fee based on their anniversary date. New businesses are required to pay the $100 fee with the submission of the application for Nevada business registration.

The Department of Taxation has granted a penalty-free grace period until July 1, 2004 in which to obtain a state business license. The late registration fee is $100 in addition to the annual fee.

Sales and Use Tax Registration:

All Nevada businesses required to have a state business license are now also required to register for sales and use tax. Every Nevada business is now required to submit and file, at least annually, either a combined sales-and-use-tax return or a consumer-use tax return, even if no tax liability exists.

Repeal of the Business Tax:

The quarterly business tax based on each company’s number of employees has been repealed effective October 1, 2003. The tax was $25 per quarter for each full-time equivalent employee. Generally, most businesses will have had a final submission of the business tax return for the quarter ended September 30, 2003.

Modified Business Tax:

Effective October 1, 2003, every employer who is subject to the Nevada unemployment compensation law is required to pay an excise tax on wages. The tax is computed on the total of gross wages, less qualified deductions for health insurance benefits paid by the employer. The tax rate is 0.7 percent for general employers and 2 percent for employers defined as financial institutions.

Employers are required to file a modified business tax return on a quarterly basis starting with the quarter ended December 31, 2003. The tax is due with the submission of the return on or before the last day of the month following the quarter.

Real Property Transfer Tax:

Effective October 1, 2003, the state of Nevada imposed a real property transfer tax at a rate of $1.30 for each $500 of value transferred. The tax is imposed on each deed by which any lands, tenements or other realty is granted, assigned, transferred or conveyed, if the value of the interest or property exceeds $100. The state tax is in addition to the local real property transfer tax.

Other State Taxes:

The 2003 Legislature also implemented an increase in taxes on cigarettes, liquor, live entertainment and gaming. In addition, there is a new quarterly excise tax due on banks.

Secretary of State Filing Fees:

Effective November 1, 2003, the fees for all filings have changed. The changes are fairly minor, with the exception of the fee now due on the annual list of officers for a registered corporation. The corporation annual list fees will now be calculated based on capitalization, on a graduated scale, with a minimum annual fee of $125 and maximum of $11,100.

Many large and generally all publicly-traded Nevada corporations will be paying an annual fee of $11,100 to the secretary of state, instead of only $85, the fee prior to November 1, 2003 – a very substantial increase.

Jason A. Thomas
Jason A. Thomas, CPA, is tax manager for Fair, Anderson & Langerman, a CPA and business advisory firm based in Las Vegas.