Many Nevada businesses may get small tax windfall

Well, at least it's something.

That's the attitude local small-business owners share toward a tax break they're set to receive under a budget proposal before the state Legislature. The spending bill calls for the elimination of Nevada's modified business tax for companies making $250,000 a year or less. Under the agreement, 70 percent of Nevada businesses, or about 115,000 companies, would receive payroll tax breaks totaling $60 million a year.

The extra cash would be small as far as windfalls go, but affected business owners say they'll welcome any relief they can get.

Take Joan Justi, chief executive officer of Allstar Event Services in Las Vegas. Justi pays maybe $100 to $200 a quarter in state gross payroll taxes on her four full-time employees. Slashing the expense won't make a big difference to Justi's bottom line, but "every little bit helps," she said.

"Any tax that we don't have to pay is wonderful. We're really hurting in the last two years. It's not enough for me to actually say, 'Wow,' but it will definitely help," Justi said.

The payroll fee took effect in October 2003 as part of $833 million in new taxes and has changed slightly over its eight-year history. It began at a rate of 0.7 percent, or $210 a year on a single employee with a gross payroll cost of $30,000, and dropped as low as 0.63 percent in July 2005. It's remained at 0.63 percent for companies with $250,000 or less in annual payroll costs. It rose to 1.17 percent in July 2009 for businesses with yearly total payrolls above $250,000. Big companies would continue to pay the 1.17 percent rate under the budget agreement.

Companies that help employees pay for health insurance can receive a small break on the tax.

Las Vegas firm Sutton Watkins Advertising and Marketing falls just below the $250,000 threshold and will reap the tax break. After taking a deduction for providing health insurance for its four employees, the company pays $500 or $600 a year in state payroll taxes. Money the company will save not paying the tax is enough to buy perhaps half a computer, said co-owner Kathy Watkins.

Still, Watkins said she'll happily accept the reduced tax bill. Factor in compliance costs for accounting and bookkeeping services, plus the paperwork headaches, and the levy can be significant over time, she said.

"Adding it all together, it would be a nice little benefit to not have to deal with it," she said. "It's an additional tax that's a nuisance for businesses to pay to have the ability to hire employees."

Not everyone's pleased with the tax break.

Steve Mevius, owner of Polar Shades Sun Control in Henderson, would have qualified for the tax break five or six years ago. But Mevius, who sells retractable shades, has expanded his 16-year-old business rapidly. Polar Shades has an annual payroll of $800,000, which hardly qualifies the company as a big business, Mevius said. He said he's not pleased being lumped in with multibillion-dollar gaming titans and mining giants.

"I am a business that continues to grow and employ people, and what is the benefit for me to remain in Nevada? They pick and choose," Mevius said. "We're a family-owned business. We work six days a week, 10 to 12 hours a day, to make all of this happen, and they draw a line. We're just a small manufacturing company trying to make it, and there's no benefit to us.

"I'd be better off shrinking," Mevius added. "Every penny counts. We just don't feel that anyone pays attention to that."

Mevius said the nearly $9,500 he'll pay in gross payroll taxes in 2011 would have instead gone to buy new equipment or pay for a move to a bigger showroom. Out of fairness, he said, he'd like to see the payroll tax either disappear for all businesses, or apply to all businesses.

For Justi, who moved her 36-year-old business from California to Nevada in 2000, the tax cut is a bit of progress, at least.

"I'm just happy to see a tax go away," she said.

Contact reporter Jennifer Robison at
jrobison@reviewjournal.com or 702-380-4512.