Although Nevada is typically known as a “tax-free” state, in 2015 a new annual Commerce Tax has been enacted.   Nevada will now impose a tax on the Nevada gross revenue of each business entity engaged in business within the state.  The first tax returns and payments under this new tax regime are due August 15, 2016. The threshold to pay the tax is currently set at $4 million of Nevada gross revenue. However, every entity, including an individual, who is engaged in business in the state is required to file a return regardless of whether or not they meet the $4 million threshold.

Interestingly, the taxable year for the new Nevada tax is not the traditional calendar year or the fiscal year of the business.  Nevada has set their own fiscal year, from July 1^st to June 30^th.  This means for 2016, the first year returns are due, taxpayers must calculate their Nevada income earned from July 1, 2015 to June 30, 2016.  The returns are due 45 days after the end of the reporting fiscal year, leaving a small window for books to be closed and returns to be prepared.   

The rate for the Commerce Tax varies by industry and is based on the NAICS code of the business entity.  This means that each industry is taxed at a different rate.  If a business entity is involved in multiple industries, the entity should choose the one that represents the category from which it derives the highest percentage of revenue. 

There are some entities that are not subject to the Commerce Tax, such as certain nonprofits, a “passive” entity, and trusts. These entities are excluded from the definition of a business.  All others engaged in business activity – including sole proprietors, partnerships and corporations – will be subject to the tax.

As of this writing, no sample forms have been released by the state of Nevada, but the law is in place. Nevada residents and non-residents who conduct business in the state should begin to prepare their books and records for reporting of Nevada gross income on the July 1 through June 30^th fiscal year. Businesses should also register with the Nevada Secretary of State and/or update their information with the Department of Taxation to record their Nevada Business ID.

If you have questions about this or any other state tax issue, we will be happy to assist you.  Contact us at 703.385.8888 or info@tgccpa.com.