Nevada officials, businesses sweat details of new commerce tax

CARSON CITY — The Department of Taxation began the nitty-gritty task Tuesday of figuring out how to implement Nevada’s new commerce tax, part of a $1.1 billion revenue package approved by lawmakers six weeks ago.

Now it’s up to department officials to develop regulations defining provisions of the law and setting clear direction on how rates will be determined and applied.

While the concept seems straightforward, questions raised by attendees of the first agency workshop on the law suggests otherwise.

“This type of tax is new to us,” said Robert Armstrong, with the Reno law firm of McDonald, Carano and Wilson. “Let’s try to simplify this as much as we can.

“People think this is a very simple tax,” he said. “My experience is it will not be.”

Deonne Contine, state taxation director, said more workshops will be held as officials sift through questions, confusion, concerns and recommendations.

The commerce tax law that took effect July 1 imposes a gross receipts tax on businesses with $4 million or more in annual revenue. Tax rates depend on the type of industry. Businesses subject to the tax can apply half of what they pay as credit toward any payroll taxes owed.

The first commerce tax payment is due Aug. 15, 2016, based on revenue obtained as of July 1, 2015.

“It really is not our intent to go after small businesses that are nowhere near the $4 million threshold,” Contine said.

But industry representatives raised many questions that were brought up during legislative hearings. Many businesses, as well as the federal government, work and collect taxes based on a calendar year. The Nevada tax is calculated on a fiscal year and based only on revenue received from in-state business activity.

A lot of discussion centered on different businesses with different functions affiliated under common ownership. One might be in shipping, another agriculture, and each industry has a different tax rate. Some might have large numbers of employees and could benefit from offsetting payroll taxes with half the commerce tax paid, while others would not.

Other representatives raised questions about industry identifiers, called NAICS codes — short for North American Industry Classification System. Codes assigned by the state do not always align with the federal government. And one umbrella business might have affiliates with different industry codes.

“That NAICS code will make a material difference in what you’re going to pay,” said Paul Enos with the Nevada Trucking Association.

Ray Bacon, executive director of the Nevada Manufacturers Association, also urged the taxation department to minimize administration.

He suggested that if a company’s revenue falls below $4 million, it be allowed to file a “postcard return” telling the department it owes no tax. That way the state agency can focus on the more complex tax filings.

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb.