Nevada’s recently enacted commerce tax has been back in the headlines, the latest dustup being a recent judicial decision that has spelled the end to a repeal effort. A coalition (led by State Controller Ron Knecht) sought to have a referendum petition placed on the November ballot − motivated by what they see as a legislative sellout of the voters who rejected a similar “margins” tax in 2014. To do so, they needed to gather more than 55,000 registered Nevada voters to sign their petition by June 21. The 20,000 signatures they had collected over the last five months were invalidated by a ruling of Nevada Supreme Court in May. Recognizing the long odds of meeting the signature deadline in a month’s time, the anti-tax coalition abandoned its efforts.
If they had succeeded in placing the measure on the ballot in November, then a “no” vote would have repealed the new tax – at least for future tax years. Now, however, it does not look like the new tax will be going away any time soon. With the deadline for filing the 2015 commerce tax returns looming, it is not too soon for taxpayers to consider the nuts and bolts of the new tax.
Nevada businesses must file their first annual commerce tax return on August 15. The annual filing requirement applies to virtually every business in Nevada, including sole proprietors, partnerships and corporations, as well as service providers such as medical professionals, attorneys and accountants, and persons engaged in the sale or rental of personal and real property. Each business is entitled to deduct the first $4 million from its annual gross revenue, with the applicable tax rate applied to the balance. The tax rates range from 0.051 to 0.331 percent for 26 different business classifications pulled from the North American Industry Classification System. A business must still make an annual filing even if it does not owe any tax as the vast majority fall below the $4 million threshold. Nevada tax collectors are bracing for upward of 300,000 businesses to be subject to the annual filing requirements.
The Nevada Tax Commission is responsible for adopting the commerce tax collection and enforcement rules, and has been holding public hearings on proposed regulations since last July. It is expected that the agency will be adopting regulations soon, and approving new forms for taxpayers to use for their August 15 filings. Judging from the most recent public hearing, however, important issues still remain to be addressed.
Open questions include the need for all businesses to file otherwise private information with Nevada tax collectors. The filing form proposed by the Nevada Tax Commission asks each “owner” of a business to include his or her personal social security number and date of birth. It seems fair to question the need for a state agency to collect and store such information, particularly in the case of a business that will owe no tax, and in a state like Nevada, whose laws frown on a governmental agency requiring such personal information unless it is “required” by a specific state law. Equally troubling is the implication that individuals providing their personal information will be deemed “responsible persons,” with joint and several liability for the tax.
The years ahead will no doubt bring legal wrangling over other aspects of the commerce tax. This has certainly been the case in Ohio and Texas − two states whose tax laws served as models for the commerce tax. Such dustups will no doubt keep the Nevada commerce tax in the headlines for years to come.
William McKean is a chief deputy attorney general with the Office of the Attorney General.
