MODIFIED BUSINESS TAX
Except as otherwise provided in section 68 of this act, there is hereby imposed an excise tax on each employer at the rate of 1.475 (from 0.63) percent of the amount by which the sum of all the wages, as defined in NRS 612.190, paid by the employer during a calendar quarter with respect to employment in connection with the business activities of the employer exceeds $50,000.
An employer is entitled to receive a credit against the tax imposed by this section in an amount equal to 50 percent of the amount of the commerce tax paid by the employer pursuant to sections 2 to 61, inclusive, of this act, for the preceding taxable year. The credit may only be used against an amount of the tax that the taxpayer is required to pay pursuant to this section for any of the 4 calendar quarters immediately following the end of the taxable year for which the commerce tax was paid. The amount of credit used for a calendar quarter may not exceed the amount of tax due for that calendar quarter. Any unused credit may not be carried forward beyond the fourth calendar quarter immediately following the end of the taxable year for which the commerce tax was paid, and a taxpayer is not entitled to a refund of any unused credit.
STATE BUSINESS LICENSE
A person shall not conduct a business in this State unless and until the person obtains a state business license issued by the Secretary of State.
- An application for a state business license must:
(c) Be accompanied by a fee in the amount of $200 (from $100), except that if the applicant is a corporation organized pursuant to chapter 78, 78A or 78B of NRS, or a foreign corporation required to file an initial or annual list with the Secretary of State pursuant to chapter 80 of NRS, the application must be accompanied by a fee of $500 (from $100);
COMMERCE TAX
For the privilege of engaging in a business in this State, a commerce tax is hereby imposed upon each business entity whose Nevada gross revenue in a taxable year exceeds $4,000,000 in an amount determined pursuant to sections 23 to 49, inclusive, of this act.
In computing the commerce tax owed by a business entity pursuant to this chapter, the business entity is entitled to deduct from its gross revenue the following amounts, to the extent such amounts are included in gross revenue of the business entity:
(l) The amount of any pass-through revenue of the business entity.
(x) Bad debts expensed for the purposes of federal income taxation.
The commerce tax required to be paid by a business entity engaging in a business in this State is equal to the amount obtained by subtracting $4,000,000 from the Nevada gross revenue of the business entity for the taxable year and multiplying that amount by the rate set forth in sections 24 to 48, inclusive, of this act for the business category in which the business entity is primarily engaged.
The construction business category (NAICS 23) includes all business entities primarily engaged in the construction of buildings or engineering projects, such as highways and utility systems. Business entities engaged in the preparation of sites for new construction and business entities primarily engaged in subdividing land for sale as building sites also are included in this category.
Examples of business entities in this category include, without limitation, general contractors, design-builders, construction managers, turnkey contractors, joint-venture contractors, specialty trade contractors, for-sale builders, speculative builders and merchant builders.
The amount of the commerce tax for a business entity included in this category is the amount obtained by subtracting $4,000,000 from the Nevada gross revenue of the business entity for the taxable year and multiplying that amount by 0.083 percent.
The real estate and rental and leasing business category (NAICS 53) includes all business entities primarily engaged in renting, leasing or otherwise allowing the use of tangible or intangible assets, providing related services, managing real estate for others, selling, renting or buying real estate for others, and appraising real estate.
The amount of the commerce tax for a business entity included in this category is the amount obtained by subtracting $4,000,000 from the Nevada gross revenue of the business entity for the taxable year and multiplying that amount by 0.25 percent.
The administrative and support services business category (NAICS 561) includes all business entities primarily engaged in activities that support the day-to-day operations of other organizations.
The amount of the commerce tax for a business entity included in this category is the amount obtained by subtracting $4,000,000 from the Nevada gross revenue of the business entity for the taxable year and multiplying that amount by 0.154 percent.
DEFINITIONS
“Business” means any activity engaged in or caused to be engaged in with the object of gain, benefit or advantage, either direct or indirect, to any person or governmental entity.
“Business entity” does not include:
(i) A real estate investment trust, as defined by section 856 of the Internal Revenue Code, 26 U.S.C. § 856, and its qualified real estate investment trust subsidiaries, as defined by section 856(i)(2) of the 3 Internal Revenue Code, 26 U.S.C. § 856(i)(2), except that:
(k) A trust qualified under section 401(a) of the Internal Revenue Code, 26 U.S.C. § 401(a).
(l) A passive entity.
(m) A person whose activities within this State are confined to the owning, maintenance and management of the person’s intangible investments or of the intangible investments of persons or statutory trusts or business trusts registered as investment companies
“gross revenue” means the total amount realized by a business entity from engaging in a business in this State, without deduction for the cost of goods sold or other expenses incurred, that contributes to the production of gross income, including, without limitation, the fair market value of any property and any services received, and any debt transferred or forgiven as consideration.
“Nevada gross revenue” means the gross revenue of a business entity from engaging in a business in this State, as adjusted pursuant to section 21 of this act and sitused to this State pursuant to section 22 of this act.
“Pass-through revenue” means:
(a) Revenue received by a business entity that is required by law or fiduciary duty to be distributed to another person or governmental entity;
(d) Revenue received by a business entity that is mandated by contract or subcontract to be distributed to another person or entity if the revenue constitutes:
(1) Sales commissions that are paid to a person who is not an employee of the business entity, including, without limitation, a split-fee real estate commission;
(3) Subcontracting payments under a contract or subcontract entered into by a business entity to provide services, labor or materials in connection with the actual or proposed design, construction, remodeling, remediation or repair of improvements on real property or the location of the boundaries of real property;
(f) Revenue received by a business entity that is part of an affiliated group from another member of the affiliated group
A business entity may use either the cash or accrual method of accounting for the purposes of reporting and determining the amount of the commerce tax owed by the business entity; and may not change that method of accounting more often than once every 3 years.
Possible Scenario:
General Contractor who is incorporated with $12 million in gross revenue and $1 million in payroll
Commerce Tax:
$12.0 mill Gross
– $6.0 mill in subs and suppliers
——–
$6.0 mill taxable revenue
– $4.0 mill deduction
——–
$2.0 mill taxable liability
x 0.083% tax rate
——–
$16,600 tax due
Modified Business Tax:
$1 mill total payroll
– $100k in health care expense
——–
$900,000 taxable payroll
x 1.475% tax rate
——–
$13,275 calculated tax
– $8,300 commerce tax credit (50%)
——–
$4,975 tax due
Business License Fee:
$500
Total tax due under new plan: $22,075
Total tax under current system: $5,770