BNA 11_20_EY_persp

Reproduced with permission from Tax Management Weekly State Tax Report, 2015 WSTR 11/20/15,
11/20/2015. Copyright ஽ 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
Ta x B a s e
The people of Nevada have long been averse to direct taxation by the government, pre-
ferring to rely on gambling and tourism taxes; however, these methods are no longer
enough to support the state. In this article, Alex Thacher, Allan Holzer and Brian Aragon of
Ernst & Young discuss Nevada’s tax gamble, the Nevada Commerce Tax, and whether it
will pay off.
Nevada’s Tax Gamble
BY ALEX THACHER, ALLAN HOLZER
AND BRIAN ARAGON
Introduction
N
evadans are known for their pioneering spirit
where individualism is celebrated. A strong aver-
sion to the direct taxation of income by the state
government has long existed; even the Nevada Consti-
tution expressly prohibits the state from implementing
a personal income tax.1
The Silver State has historically
raised revenue through an assortment of excise taxes
and taxes associated with Nevada’s most famed indus-
try: gambling.2
In effect, the reliance on tourists’ dollars
1
Nev. Const. art. I0, §1.
2
See Nevada Legislative Counsel Bureau, Fiscal Analysis
Division, Revenue Reference Manual, pg. 4 (January 2015),
available at http://www.leg.state.nv.us/Division/Fiscal/
Alex Thacher (Executive Director), Allan Hol-
zer (Senior Manager), and Brian Aragon
(Staff) are members of Ernst & Young LLP’s
Indirect, State and Local Tax Services prac-
tice. The views expressed are those of the
authors, who can be contacted at:
Alex.Thacher@ey.com; Allan.Holzer@ey.com;
and Brian.Aragon@ey.com; and do not nec-
essarily reﬂect the views of Ernst & Young
LLP. Special thanks to Steve Wlodychak, Ste-
phen McDonald, Sean Trejo, and Alex Bray
for their assistance.
Copyright ஽ 2015 TAX MANAGEMENT INC., a subsidiary of The Bureau of National Affairs, Inc. ISSN 1534-1550
Tax Management
Weekly State Tax Report™

has relieved Nevada businesses and residents from oth-
erwise shouldering a heavier tax burden.3
As Nevada’s population has grown, so has its govern-
mental infrastructure and corresponding need for tax
revenue to support it. Responding to a budget shortfall
in 2003, the Legislature acted and adopted the Modified
Business Tax (MBT), a quarterly payroll tax on all busi-
nesses in the state determined by the total gross wages
paid to their employees.4
The indirect nature and opera-
tion of the tax conveyed a disinclination to endorse a
corporate income tax, contrary to the trend that the rest
of the country has taken with very few exceptions.5
The
MBT was and is a major consideration for businesses
operating in Nevada and continues to be a unique part
of its business tax environment.
The MBT has not solved Nevada’s fiscal problems,
and the state has continued to struggle to meet its finan-
cial commitments.6
Since the recession in the late
2000’s, the budget shortfall in education has become in-
creasingly politicized, culminating in a 2014 ballot ini-
tiative.7
The initiative proposed a two percent ‘‘margin
tax’’ modeled upon the Texas Franchise Tax on all busi-
nesses operating in Nevada earning more than one mil-
lion dollars in revenue.8
Proceeds from the tax were to
be allocated to fund public education.9
The initiative
sparked a public dialogue and highlighted the serious
challenges that the Legislature faced if the law failed to
pass. When the question reached the voters, 78 percent
voted ‘‘No’’ to the proposed margin tax.10
The ballot ini-
tiative was roundly defeated at the polls, and the ballot
outcome appeared to have closed any option for Ne-
vada to adopt a new business tax.
Although the electorate had spoken, Republican
Gov. Brian Sandoval, who had won re-election in 2014
in a landslide almost equivalent to the percentage of
voters who rejected the ballot measure, still faced a
budget shortfall that needed to be addressed.11
During
the 2015 legislative session, he proposed the Nevada
Commerce Tax which was embodied in Nevada Senate
Bill 483.12
This new business tax, which took effect on
July 1, 2015, is a tax imposed on all businesses, regard-
less of form, based on their Nevada-sourced gross re-
ceipts.13
Comparisons between the Commerce Tax and
the defeated margin tax have been drawn, the similari-
ties leaving observers confused and critics who opposed
the 2014 initiative outraged.14
Both the legislators and
the governor appear to have ignored the voters, and le-
gal challenges to this new tax have arisen.15
For those affected, these events have triggered a bar-
rage of questions and concerns: Why did state politi-
cians enact a new law that looks so similar to the un-
popular initiative defeated by popular vote only months
before? What about the MBT? Will the new tax be re-
pealed? Who is subject to the tax? How do I determine
my liability and what is taxable? Will Nevada’s tax
gamble pay off?
The Modified Business Tax
Nevada implemented the MBT in 2003, a quarterly
payroll tax measured by the total gross wages paid to
employees less employee health care benefits paid by
the employer.16
The MBT has two classifications, which
have historically been taxed at different rates: one for
general businesses and another for financial institu-
tions.17
Until July 1, 2015, most general business em-
ployers were subject to a 1.17 percent tax rate on wages
in excess of $85,000 during each taxable quarter.18
Fi-
nancial institutions were provided no wage exclusion,
and the tax rate has remained at 2 percent since its in-
ception.19
Although the MBT was Nevada’s primary tax on
businesses operating within the state until recently, it
FinalRRM2015.pdf (last accessed Sept. 9, 2015), (Illustrating
the impact of gaming and excise tax related revenue); see also
Nevada Resort Association, How Gaming Benefits Nevada,
http://nevadaresorts.org/benefits/taxes.php (last accessed Sept.
9, 2015) (detailing hotel and casino industry contributions to
the state).
3
Ibid.; see also J.D. Morris, Nevada gaming revenue passes
the $1 billion mark in May, Vegas Inc. (June 26, 2015), http://
vegasinc.com/business/gaming/2015/jun/26/nevada-gaming-
revenue-passes-1-billion-mark-may. The revenue generated
from gaming is substantial, and without that revenue addi-
tional taxes would likely be necessary.
4
Nev. Rev. Stat. §363B.110.
5
See Jared Walczak, State Corporate Income Tax Rates
and Brackets for 2015, Tax Foundation (Apr. 21, 2015), http://
taxfoundation.org/article/state-corporate-income-tax-rates-
and-brackets-2015 (Most states impose an income tax on busi-
nesses. A minority of states impose indirect gross receipts-
based taxes, including Ohio (commercial activity tax on Ohio
sourced gross receipts), Texas (franchise tax based on taxable
margin apportioned or allocated to Texas), and Washington
(business and occupation tax based on Washington gross re-
ceipts)).
6
See Laura Myers, Nevada legislative leaders seek more
education funding, Las Vegas Review-Journal (Nov. 20, 2014),
http://www.reviewjournal.com/news/nevada/nevada-
legislative-leaders-seek-more-education-funding (discussing
the need for additional revenue to fund education, comments
made by Senate Majority Leader Michael Roberson and As-
sembly Speaker Marilyn Kirkpatrick).
7
The Education Initiative is available at http://nvsos.gov/
Modules/ShowDocument.aspx?documentid=2425 (last ac-
cessed Sept. 11, 2015).
8
Ibid. at §22.1.
9
Ibid. at §1.
10
See Nevada Secretary of State, Ballot Questions, http://
www.silverstateelection.com/ballot-questions (last accessed
Sept. 9, 2015) (displaying ‘‘State Question No. 3’’ ballot count).
11
Ibid. at Statewide Results, http://
www.silverstateelection.com/NVOther (last accessed Sept. 9,
2015) (displaying Gov. Sandoval’s victory over challenger Rob-
ert Goodman by 70.58 percent to 23.88 percent).
12
Nev. S.B. 483 (2015).
13
Ibid. at §20.1, 2.
14
Associated Press, Activists File Petition Seeking to Re-
peal Entire Tax Package, Nevada Public Radio (Apr. 11, 2015),
http://knpr.org/headline/2015-08/activists-file-petition-seeking-
repeal-entire-tax-package.
15
See e.g., William H. Carlile, Dueling Suits Filed Over Ne-
vada Tax Package; PAC Formed, 2015 Weekly State Tax Re-
port 27, 9/11/15 (forming of a Political Action Committee
(‘‘PAC’’) to block the efforts of those opposed S.B. 483, and cit-
ing We Decide Coalition v. Cegavske, Nev. Dist. Ct., No. A-15-
723735-C, complaint filed Aug. 27, 2015; Coalition for Ne-
vada’s Future v. Muth, Nev. Dist. Ct., No. 15OC00196 1B, com-
plaint filed Aug. 28, 2015).
16
Nev. Rev. Stat. §363:110.
17
Nevada Department of Taxation, Modified Business Tax
Information & FAQ’s is available at http://tax.nv.gov/FAQs/
Modified_Business_Tax_Information___FAQ_s (last accessed
on Sept. 9, 2015).
18
Ibid.
19
Ibid.
2
11-20-15 Copyright ஽ 2015 TAX MANAGEMENT INC., a subsidiary of The Bureau of National Affairs, Inc. TM-WSTR ISSN 1534-1550

was projected to account for only 9.3 percent of the to-
tal state revenue between 2013 and 2015.20
While the
MBT did expand the state’s tax base beyond excise
taxes, the state continues to heavily rely on proceeds
generated from gaming, sales, and other excise taxes,
accounting for a combined 67.9 percent of projected
state revenues.21
The Nevada Education Initiative
(Nevada’s Margin Tax)
The origins of the margin tax proposed by the Edu-
cation Initiative did not begin in Nevada; Texas in the
late 2000’s was facing legal pressure to increase fund-
ing for public education.22
In response, Texas adopted
the current version of its franchise tax, which has been
described as a hybrid between an income tax and a tax
on gross receipts.23
In summary, the Texas Franchise
Tax or ‘‘margin tax,’’ is a tax on a business entity’s
‘‘margin,’’ determined by the lesser of three calcula-
tions: total revenue less cost of goods sold, total rev-
enue less compensation, or 70 percent of total rev-
enue.24
Most businesses pay tax at the current rate of
0.95 percent, but a reduced rate of 0.475 percent is
available for retailers and wholesalers.25
Furthermore,
‘‘a taxable entity is not required to pay any tax and is
not considered to owe any tax if the amount of tax’’ is
less than $1,000’’ or ‘‘total revenue from its entire busi-
ness is less than or equal to one million dollars.’’26
In 2012, the Nevada American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO)
and the Nevada State Education Association filed a bal-
lot initiative to create Nevada’s own margin tax.27
It
was titled ‘‘The Education Initiative’’ and required ‘‘the
proceeds of the tax to be used to fund the operation of
public schools.’’28
The initiative would have created a 2
percent margin tax for businesses operating in Nevada
generating more than one million dollars in total rev-
enue during the taxable year.29
The margin was to be
determined using a nearly indistinguishable calculation
to that used by Texas, by taking the lesser of 70 percent
of the entity’s total revenue, or the entity’s total revenue
less the cost of goods sold, or the entity’s total revenue
less the amount of compensation paid to its owners and
employees.30
During the two years it took for the initiative to reach
the ballot, opposition grew in both political parties. The
Nevada AFL-CIO even withdrew its support after origi-
nally backing the measure.31
The administration of the
University of Nevada, Las Vegas, denounced an eco-
nomic report conducted by its own Center for Business
and Economic Research on the benefits of the margin
tax.32
Opponents argued that the fragile post-recession
economy could not survive the proposed tax, that Ne-
vada would lose thousands of jobs, and that the cost of
doing business would increase and drive up prices for
consumers.33
By the time the question was presented to
the people in November 2014, the lack of support for
the measure was self-evident. Of the 545,215 ballots
cast, 429,424 (78.74 percent) voted against the creation
of a margin tax in Nevada.34
Necessity Is the Mother of Invention
One thing the ballot initiative did, however, was
bring education reform to the attention of Nevada’s
governmental officials. On Nov. 20, 2014, prior to the
78th
legislative session, Senate Majority Leader Michael
Roberson stated:
We have really two choices. . . We can either reform
our tax structure in a broad-based, fair way in col-
laboration with the community. . .in a way that gen-
erates more revenue. Or we’re going to be in a situa-
tion where we’re going to have to cut education sig-
nificantly.35
Even prior to the 2014 fall election, Gov. Sandoval,
an opponent of the margin tax initiative, when asked if
he would support new taxes if re-elected answered,
‘‘You’ll find out.’’36
After winning reelection, Sandoval
committed himself to tax reform, stating:
20
Nevada Legislative Counsel Bureau, Fiscal Analysis Divi-
sion, Revenue Reference Manual, at 4.
21
See ibid. (showing proportion of revenues from excise
taxes (e.g., sales and use taxes—35.5 percent, live entertain-
ment tax—5 percent, gaming taxes—23.7 percent, liquor tax—
1.3 percent, cigarette tax—2.4 percent) amount to a majority
(67.8 percent) of projected state revenues prior to the enact-
ment of S.B. 483).
22
See Neeley v. West Orange-Cove Consol. Indep. Sch.
Dist., 176 S.W.3d 746 (Tex. 2005) (holding by the Texas Su-
preme Court that local ad valorem taxes had become an imper-
missible state property tax in violation of the Texas Constitu-
tion. Those taxes had been the primary method for funding
public schools. The state government needed to supplement
the lost revenue stream with an alternative solution).
23
Texas Taxpayers and Research Association, Understand-
ing the Texas Franchise—or ‘‘Margin’’—Tax, pg. 2 (October
2011), is available at http://www.ttara.org/files/document/file-
4ea5bda9239ef.pdf.
24
Tex. Tx. Code Ann. §171.101.
25
Tex. Tx. Code Ann. §171.0023 (imposing 0.95 percent for
most entities, 0.475 percent for qualifying wholesalers and re-
tailers, 0.575 percent for those entities with $10 million or less
in total revenue for reports ‘‘originally due on or after January
1, 2015, and before January 1, 2016’’).
26
Ibid. at §171.102(d); see also Texas Comptroller of Pub-
lic Accounts, Franchise Tax Frequently Asked Questions,
http://comptroller.texas.gov/taxinfo/franchise/
faq_rpt_pay.html (last accessed on Oct. 29, 2015) (showing the
$1,000,000 ‘‘no-tax-due’’ threshold for reports due in 2014 and
2015 at $1,080,000 as adjusted by §171.006).
27
Steve Sebelius, Tax Plan Has Miles to Go Before It’s
Passed, Las Vegas Review-Journal (Jun. 8, 2012), http://
www.reviewjournal.com/steve-sebelius/tax-plan-has-miles-go-
its-passed.
28
The Education Initiative, §1.
29
Ibid. at §22.1.
30
Ibid. at §23.
31
Sean Whaley, Nevada AFL-CIO Opposes Proposed Mar-
gins Tax to Fund Public Schools, Las Vegas Review-Journal
(May 2, 2014), http://www.reviewjournal.com/politics/nevada-
afl-cio-opposes-proposed-margins-tax-fund-public-schools.
32
Adwoa Fosu, UNLV Rejects Its Own Study on Proposed
Margin Tax, The Rebel Yell (Aug. 22, 2014), http://
www.unlvrebelyell.com/2014/08/22/unlv-rejects-its-own-study-
on-proposed-margin-tax/#sthash.jBE1dHAM.dpuf.
33
See Stop the Margin Tax, http://stopthemargintax.com/
get-the-facts (last accessed on Sept. 30, 2015), hosted at https://
web.archive.org/web/20141119000735/http://
stopthemargintax.com/get-the-facts.
34
Nevada Secretary of State, Ballot Questions.
35
Myers, supra note 6.
36
Ray Hagar, Sandoval Says He Wants Major State Fund-
ing Overhaul in 2015, Reno Gazette-Journal (Oct. 26, 2014),
3
TAX MANAGEMENT WEEKLY STATE TAX REPORT ISSN 1534-1550 BNA TAX 11-20-15

What is the alternative? I’m not trying to be smart-
alecky. But if we do nothing, we in this state will be
in the same situation. And then the next governor
will have to look at it as well. The revenue streams in
this state are changing and we have to have revenue
streams that match the new economy we have.37
During the legislative session at the start of 2015, it
became clear that the state faced a nearly $200 million
budget deficit in public education.38
The Nevada busi-
ness community also began expressing support for the
governor’s plan.39
Under this pressure, S.B. 483 was
drafted and enacted into law on June 9, 2015.40
The Ne-
vada Commerce Tax was born.
When Governor Sandoval signed S.B. 483, there was
immediate resistance. Republican State Senator Don
Gustavson said that legislators ‘‘should be ashamed of
themselves to force through the largest tax increase in
Nevada’s history that includes the type of tax that vot-
ers did not support.’’41
His grievance echoed through-
out the state and there have been efforts to repeal the
law and to recall the politicians who supported it.42
Many in the government who were vocal opponents of
the margin tax supported S.B. 483,43
most notably Gov.
Sandoval because, as in Texas, the need for a new busi-
ness tax was born out of necessity. Since voters had re-
jected the margin tax and had never known an income
tax, state leaders chose to go down the route of a tax on
gross revenue.
Nevada’s Tax Gamble
The Nevada Commerce Tax is imposed annually on
any business entity engaged in business within the
state.44
For purposes of the tax, a business is defined as
‘‘any activity engaged in or caused to be engaged in
with the object of gain, benefit or advantage, either di-
rect or indirect, to any person or governmental en-
tity.’’45
Business entities specifically listed in the Com-
merce Tax law include any corporation, partnership,
proprietorship, limited liability company, business asso-
ciation, joint venture, limited liability partnership, busi-
ness trust, professional association, joint stock com-
pany, holding company, and any other person engaged
in business.46
The statute excludes from taxation any person or
other Nevada entity that is prohibited from taxation un-
der the U.S. Constitution and excludes a ‘‘natural per-
son,’’ unless the ‘‘natural person’’ is engaged in a busi-
ness and is required to file a Schedule C reporting busi-
ness income on his or her federal I.R.S Form 1040.47
The Nevada government and U.S. federal entities are
also exempt, as are nonprofit organizations that qualify
for tax exempt status under IRC §501(c). Other ex-
empted business entities include those organized under
Chapters 82 (nonprofit corporations) and 84 (corpora-
tions sole) of the Nevada Revised Statutes (NRS), credit
unions, grantor trusts, qualifying real estate investment
trusts (REITs), real estate mortgage investment con-
duits (REMICs), and ‘‘passive entities,’’ among others.48
Under S.B. 483, a ‘‘passive entity’’ is a limited liabil-
ity company, general partnership, limited liability part-
nership, limited partnership or limited liability limited
partnership or a trust, other than a business trust, with
at least 90 percent of federal gross income attributable
to the following:
s Dividends, interest, foreign currency exchange
gains, periodic and non-periodic payments with respect
to notional principal contracts, option premiums, cash
settlements, or termination payments with respect to a
financial instrument, and income from a limited-liability
company;
s Capital gains from the sale of real property, gains
from the sale of commodities traded on a commodities
exchange; and gains from the sale of securities; and
s Royalties, bonuses, or delay rental income from
mineral properties and income from other non-
operating mineral interests.49
By comparison, a business conducts an active trade
or business if its activities ‘‘include one or more active
operations that form a part of the process of earning in-
come or profit, and the business entity performs active
management and operating functions’’ or ‘‘any assets,
including, without limitation, royalties, patents, trade-
marks and other intangible assets, held by the business
entity are used in the active trade or business of one or
more related business entities.’’50
Although creating a
filing obligation, the gross revenue generated from
these activities may be excludable as discussed in the
‘Exclusions and Deductions’ section below.
http://www.rgj.com/story/news/2014/10/26/sandoval-says-
wants-major-state-funding-overhaul/17867297.
37
Ibid.
38
See Myers, supra note 6 (Senate Majority Leader Michael
Roberson comments regarding the shortfall in education fund-
ing).
39
See e.g., Michelle Rindels, Nevada GOP Governor Se-
cures Unlikely Win With Tax Increase, Associated Press (Jun.
2, 2015), http://bigstory.ap.org/article/
7cd1fa2cff5647459beb77a91032fdb6/nevada-gop-governor-
secures-unlikely-win-tax-increase; see also Sandra Chereb,
Governor’s ‘‘Plan B’’ Tax Plan Undergoes Grilling; Has Sup-
port From Nevada Casinos, CDC Gaming Reports (May 25,
2015), http://cdcgamingreports.com/governors-plan-b-tax-
plan-undergoes-grilling-has-support-from-nevada-casinos
(stating representatives of the state’s largest industries, includ-
ing resorts, banking, mining, utilities and hospitals, told mem-
bers of the Assembly Ways and Means and Senate Finance
committees that they support the governor’s plan).
40
Nevada Legislative Counsel Bureau, S.B. 483, Nevada
State Legislature, available on the Internet at https://
legiscan.com/NV/bill/S.B.483/2015 (last accessed Sept. 30,
2015).
41
See Rindels, supra note 39.
42
Carol Howell, Referendum to Repeal Commerce Tax and
Recall Senator(s), Carson Now (Jun. 25, 2015), http://
carsonnow.org/reader-content/06/25/2015/referendum-repeal-
commerce-tax-and-recall-senators; Whaley, supra note 31.
43
See Rindels, supra note 39 (showing a prior opponent to
the Education Initiative, Sen. Scott Hammond (R) comments
supporting S.B. 483).
44
Nev. S.B. 483 §20.1.
45
Ibid. at §3.
46
Ibid. at §4.1.
47
Ibid. at §4.2(c),(d).
48
Ibid. at §4.2(a-n).
49
Nev. S.B. 483 §14.1(b)(1-3).
50
See ibid. at §14.3(a)(1-2) (The term ‘‘related business en-
tities’’ is not defined in S.B. 483; however, an ‘‘affiliated group’’
is defined at §11.2(a),(b) as a group of two or more business
entities controlled by one or more common owners or by one
or more members of the group. ‘‘Controlled by’’ entails ‘‘the di-
rect or indirect ownership, control or possession of 50 percent
or more of a business entity.’’)
4

Nexus and Filing Requirements. A business entity is
‘‘engaged in business’’ for purposes of the Commerce
Tax for ‘‘commencing, conducting or continuing a busi-
ness, the exercise of corporate or franchise powers re-
garding a business, and the liquidation of a business
which is or was engaging in a business when the liqui-
dator holds itself out to the public as conducting that
business.’’51
A business entity that is engaged in busi-
ness and ‘‘whose Nevada gross revenue in a taxable
year exceeds $4,000,000’’ is subject to the Commerce
Tax. Although the statute never addresses nexus, this
language seems to establish ‘‘economic’’ or ‘‘bright-
line’’ nexus principles whereby a business with Nevada-
sourced revenue exceeding the threshold amount will
be subject to the Commerce Tax without regard to the
business’s physical presence in the state. For filing pur-
poses, however, the law states that an entity engaged in
business in Nevada still has the requirement to file an
annual return, even if Nevada gross revenue is below
the $4,000,000 threshold amount.52
Under the current
language of S.B. 483 and the guidance provided by the
department, a business with any Nevada-sourced rev-
enue may be required to file a Commerce Tax return.53
Business Classifications. The Commerce Tax is im-
posed at 26 different rates depending upon the business
category in which the business entity is ‘‘primarily en-
gaged.’’54
A business entity is treated as ‘‘primarily en-
gaged’’ in the business category in which the highest
percentage of its gross revenue is generated as deter-
mined by its North American Industry Classification
System (NAICS) code.55
Business categories are spe-
cific: for instance, there is a separate business category
under the statute for construction, wholesale trade,
manufacturing, and educational services, among oth-
ers.56
The tax rate for each business category varies
from 0.052 percent to 0.331 percent.57
Business entities
required to file a return must select their business cat-
egory in the initial return and cannot change it without
approval from the Nevada Department of Taxation.58
Exclusions and Deductions. The Commerce Tax is a
tax on ‘‘the privilege of engaging in a business’’ in Ne-
vada.59
Gross revenue consists of the total amount real-
ized by a business entity engaged in business, without
deduction for the cost of goods sold or other expenses
incurred that contribute to the production of gross in-
come, including, without limitation, the fair market
value of any property and any services received, and
any debt transferred or forgiven as consideration.60
Gross revenue includes amounts realized from the sale,
exchange or other disposition of a business entity’s
property, amounts realized from the performance of
services by a business entity, amounts realized from an-
other person’s possession of the property or capital of a
business entity or any combination of these amounts.61
Perhaps the most obvious exclusion from gross in-
come is the initial four million dollars of revenue.62
Business entities that earn less than the four-million-
dollar exclusion will still be required to file an annual
return, but they will not have taxable gross receipts un-
der the Commerce Tax.63
S.B. 483 also notably ex-
cludes the amounts realized from the sale, exchange,
disposition or other grant of the right to use trade-
marks, trade names, patents, copyrights and similar in-
tellectual property.64
Other exclusions from taxable
gross receipts include cash discounts, the value of
goods or services provided to a customer on a compli-
mentary basis, amounts realized in recognized tax-free
reorganizations, and amounts indirectly realized from a
reduction of an expense or the deduction of the value of
property or services donated to nonprofits.65
Because it’s a tax on gross receipts, deductions are
limited, yet there are still more than twenty specific de-
ductions listed in S.B. 483.66
Notably, many industries
already liable for certain pre-existing licensing fees cal-
culated using gross receipts will be allowed to deduct
the entire amount used to determine the amount of the
other fee.67
For example, the Commerce Tax liability
for casinos and gaming activities will be zero because
the fee for state and county gaming licenses is based on
gross receipts.68
This also applies to business entities in
the mining industry subject to the net proceeds tax from
mineral extraction and royalties under NRS 362.100
through 362.240.69
Other prominent deductions include gross revenue
attributable to dividends and interest from federal and
state government bonds,70
‘‘pass-through’’ revenue,71
interest income other than interest on credit sales,72
dividends and distributions from corporations and dis-
tributive or proportionate shares of receipts and income
from a pass-through entity,73
and bad debts expensed
for the purposes of federal income taxation.74
‘‘Pass-
51
Ibid. at §6.
52
Ibid. at §20.2; see also Nevada Department of Taxation,
Commerce Tax Questions and Answers, Sept. 8, 2015, is avail-
able at http://tax.nv.gov/uploadedFiles/taxnvgov/Content/
FAQs/Commerce_Tax_FAQs.pdf. (last accessed on Sept. 22,
2015) (stating ‘‘[E]very business entity subject to the Com-
merce Tax is required to file a return whether they have a tax
liability or not. However, those entities that do not have
$4,000,000 in gross revenue will only be required to report
their Nevada gross revenue amount(s) and will not be required
to provide any additional information.’’)
53
Ibid.
54
Nev. S.B. 483 §15.
55
Nevada Department of Taxation, Major Legislation Over-
view 2015, is available at http://tax.nv.gov/uploadedFiles/
taxnvgov/Content/Home/Features/
2015_Legislative_Summary.pdf (last accessed Sept. 9, 2015).
56
Ibid.
57
Ibid.
58
Nev. S.B. 483 §20.3.
59
Ibid. at §20.1.
60
Ibid. at §8.1.
61
Ibid. at §8.2(a-d).
62
See ibid. at §8.1. (stating the tax is ‘‘hereby imposed
upon each business entity whose Nevada gross revenue in a
taxable year exceeds $4,000,000.’’)
63
Nev. S.B. 483 §§3(a), 20.2.
64
Ibid. at §8.3(a).
65
Ibid. at §8.3(b-g).
66
Ibid. at §21.1(a-aa).
67
Nev. S.B. 483 §21.1.
68
Ibid. at §21.1(c).
69
Ibid. at §21.1(d); see also Nev. Rev. Stat. §362.110 (The
computation of the ‘‘patented mines and proceeds of minerals’’
tax is measured by the gross ‘‘yield’’ or revenue less certain
itemized costs. The amount of gross revenue used to determine
the tax for Nev. Rev. Stat. §362.110 is deductible against the
gross revenue reported under the Commerce Tax).
70
Ibid. at §21.1(b).
71
Nev. S.B. 483 §21.1(l).
72
Ibid. at §21.1(o).
73
Ibid. at §21.1(p).
74
Ibid. at §21.1(x).
5

through’’ revenue includes, but is not limited to, rev-
enue received from members of an affiliated group.75
The plain language indicates that any sales or transac-
tions between members of a common group would not
be subject to the Commerce Tax.
What Is Nevada Gross Revenue? Sourcing (or situsing)
revenue will generally depend upon the nature of the
gross receipts generated by the company although the
statute appears to adopt a ‘‘destination’’ sourcing rule
for all types of revenue. For instance, sales will be si-
tused by the location of the property sold or where busi-
ness services are performed.76
More specifically, gross
rents, royalties, and revenue from the sale of real prop-
erty are sitused to the location of the real property.77
Gross rents and royalties from tangible personal prop-
erty are sitused to Nevada to the extent that the tangible
personal property is located or used in the state.78
Rev-
enue from the sale of tangible personal property is
sourced to the buyer or point of delivery regardless of
Free on Board (FOB) terms.79
For services, gross rev-
enue is sourced to where ‘‘the purchaser of a service ul-
timately uses or receives the benefit of the service. . .’’80
Records that do not allow a business to effectively de-
termine the location where the benefit of the service
was received may use an alternative method if that
method is reasonable, consistent, and uniformly ap-
plied.81
Without the benefit of additional guidance, it
may be difficult to determine what methods the Nevada
Department of Taxation will accept, but there may be
clarification in forthcoming regulations.
The Commerce Tax is due annually to the Nevada
Department of Taxation, within 45 days after the end of
the taxable year.82
Unlike a typical fiscal or calendar
year under the IRC or other state taxes, the taxable year
for purposes of the Commerce Tax is consistent with
Nevada government’s fiscal year (not the taxpayer’s
year) and begins on July 1 and ends on June 30 of the
following year.83
The first mandatory filing date for
businesses subject to the tax will be 45 days after the
taxable period ending June 30, 2016. Thus, no returns
or payments will be due until Aug. 15, 2016. Addition-
ally, businesses must file a Commerce Tax return for
each separate entity that is required to file.84
There is
currently no guidance provided to elucidate the regis-
tration requirements for a previously unregistered busi-
ness with a potential future Commerce Tax liability. At
the time of the writing of this article, existing business
registration forms have not been updated to include
registration for the Commerce Tax, and the language in
S.B. 483 is silent on the issue. At present, it appears that
a business with Nevada-sourced revenue at any point
during the taxable year will have to both register and
file before the first filing deadline in 2016. Future guid-
ance on this issue is likely to be issued as the deadline
approaches.
Extensions are allowable for ‘‘good cause’’ upon
‘‘written application made before the date on which
payment of the Commerce Tax [is] due.’’85
However,
the Department of Taxation may only extend payment
for up to 30 days without assessing a late penalty and
the ‘‘business entity shall pay interest at the rate of 0.75
percent per month from the date on which the amount
would have been due without the extension until the
date of payment, unless otherwise provided.’’86
Con-
ceivably, to alleviate the inevitable confusion of transi-
tioning to a new tax scheme, the Legislature included
Section 110, which waives penalties and interest pay-
ments for a person’s failure to file a timely report or to
pay the Commerce Tax or for any failure to comply that
occurs before Feb. 15, 2017.87
A taxpayer is entitled to
this waiver so long as the failure ‘‘occurred despite the
person’s exercise of ordinary care’’ and was ‘‘not inten-
tional or the result of willful neglect.’’88
For accounting purposes, Section 50 of S.B. 483
mandates that a business entity’s method of accounting
for gross revenue must be the same as the method of ac-
counting used for federal income tax purposes.89
If the
method of accounting changes for federal income tax
purposes, the same method of accounting must be fol-
lowed for determining revenue recognition for pur-
poses of the Nevada Commerce Tax.90
Is This an Income Tax? Pursuant to Accounting Stan-
dards Codification (ASC) 740, businesses calculate and
recognize income taxes as a liability for accounting pur-
75
Ibid. at §11.1(f); see also §11.2(a),(b); see also supra at
50. (Although required to file separately, proposed regulations
have been drafted which are intended to modify the meaning
of an ‘‘affiliated group’’ under the MBT to ‘‘allow for [a] pay-
roll provider to take a Commerce Tax Credit toward affiliated
group MBT Liability.’’ Proposed Regulation of the Nevada Tax
Commission, is available at http://tax.nv.gov/uploadedFiles/
taxnvgov/Content/FAQs/Regulations percent20Draft per-
cent209 percent208.pdf (last accessed Oct. 11, 2015), amend-
ing Financial Institutions & Business Tax, Nev. Rev. Stat.
§363(a),(b). This amendment would define an ‘‘affiliated
group’’ for MBT purposes as determined for federal income
tax purposes under IRC §§1504(a) or 1563(a)(2) and the asso-
ciated federal consolidated return regulations (Treas. Regs.
§1.1502-1, et seq.). However, there appears to be a discrepancy
between the 80 percent common ownership required under
IRC §1504(a) for affiliation and the 50 percent common own-
ership of an ‘‘affiliated group’’ for Nevada purposes described
in S.B. 483. If adopted, the definition of an ‘‘affiliated group’’
under the Commerce Tax would be different than the defini-
tion under the MBT and this could lead to the possibility that
an affiliated group under the Commerce Tax would not be al-
lowed to use its Commerce Tax credits to offset MBT liability
under different percentage affiliation rules. In order to qualify
under the disparate rules, the affiliated group would have to be
80 percent commonly controlled to benefit from credits gener-
ated from an affiliate).
76
Nev. S.B. 483 §22.1(a-g).
77
Ibid. at §22.1(a),(b).
78
Ibid. at §22.1(c).
79
Ibid. at §22.1(d).
80
Ibid. at §22.1(f).
81
Nev. S.B. 483 §22.1(f).
82
Ibid. at §20.2.
83
Ibid. at §12.
84
Ibid. at §20.2.
85
Ibid. at §20.4.
86
Nev. S.B. 483 §20.4.
87
Ibid. at §110.
88
Nev. S.B. 483 §110; see also Nevada Department of Taxa-
tion, Commerce Tax Questions and Answers (stating while it
is expected that each business entity will do its best to fully
comply with the Commerce Tax provision, there is a grace pe-
riod until Feb. 15, 2017, whereby no interest or penalty will be
assessed for failure to comply unless the failure was inten-
tional or due to willful neglect).
89
Ibid. at §50.
90
Ibid.
6

poses.91
The measure of taxable income is determined
by the net income after making allowable deductions
from gross revenue. Non-income-based taxes or indi-
rect taxes (e.g., sales tax, property tax, gross receipts
taxes) are reported as contingencies under ASC 450.92
While S.B. 483 provides for ‘‘deductions,’’ these so-
called deductions are more akin to mere exclusions
(similar to the manner in which other states’ gross
receipts-based taxes work). As such, for financial re-
porting purposes, the Commerce Tax seems as if it
should be treated as a non-income-based tax under
ASC 450 rather than an income-based tax under ASC
750.
Given the Commerce Tax on its face is not a tax
based on net income, it seems unlikely that the federal
protections provided under Public Law 86-272 (Pub. L.
No. 86-272) against its imposition on out-of-state tax-
payers whose activities are limited to the mere solicita-
tion of the sale of tangible property would apply. Re-
gardless, the enabling legislation does not address the
issue and the Department of Taxation has not weighed
in with its view. 93
Comparisons to Other Jurisdictions. The Commerce
Tax resembles other gross receipts taxes around the
country, such as Washington State’s Business and Oc-
cupation (B&O) Tax, the City of Los Angeles Business
Tax (LABT), and San Francisco’s Gross Receipts Tax.
Washington’s B&O tax is levied on businesses, ‘‘for the
act or privilege of engaging in business activi-
ties. . .measured by the application of rates against
value of products, gross proceeds of sales, or gross in-
come of the business. . .’’94
Gross income includes
‘‘gross proceeds’’ for business activities without any de-
duction for the cost of goods sold, materials used, costs
of labor, taxes, or ‘‘any expense whatsoever paid or ac-
crued and without any deduction on account of
losses.’’95
Like the Commerce Tax, the B&O tax is im-
posed at different rates on different business activities
although under the B&O tax, a taxpayer is required to
report and pay tax on different revenue streams at dif-
ferent rates.96
One important distinction between the
Washington and Nevada taxes is that Washington
doesn’t have a state payroll tax that is the equivalent to
Nevada’s MBT.
The City of Los Angeles once had a dual gross re-
ceipts and payroll tax structure that it was forced to
abandon because it was determined to be discrimina-
tory.97
The current LABT imposes a tax on the gross re-
ceipts of a business ‘‘engaged in business.’’98
Gross re-
ceipts are determined by a similar definition to that of
Nevada’s:
The total amount charged or received for all sales
and commissions for the performance of any act, ser-
vice or employment of whatever nature it may be,
whether such service, act or employment is done as
part of or in connection with the sale of goods,
wares, merchandise or not, for which a charge is
made or credit allowed, including all receipts, cash,
credits and property of any kind or nature, any
amount for which credit is allowed by the seller to
the purchaser without any deduction therefrom on
account of the cost of the property sold, the cost of
materials used, labor or service costs, interest paid or
payable, losses or any other expense whatso-
ever. . .99
Like Nevada, income is reported under different clas-
sifications depending on its source and each category is
taxed at a different rate.100
The LABT further requires a
business with multiple income classifications to report
each under a separate registration certificate and pay a
separate business tax for each.101
However, a taxpayer
subject to the LABT can make an election to be taxed
under a single primary classification if ‘‘one of the ac-
tivities generates at least 80 percent of the person’s an-
nual taxable gross receipts.’’102
Like the LABT and the Nevada Commerce Tax, the
San Francisco Gross Receipts Tax is a tax on the ‘‘privi-
lege’’ of engaging in business.103
‘‘Gross receipts’’ is
broadly defined104
and income from different business
activities is categorized and taxed at several rates.105
One significant difference of note between the San
Francisco Gross Receipts Tax and the Nevada Com-
merce Tax is that the people of San Francisco voted in
favor of implementing a new business tax.106
The New MBT and Business License Fees. Modifications
to the MBT were also made under S.B. 483. The auto-
matic reduction in the general business rate to 0.63 per-
cent that was set to take effect was prevented. Instead,
effective July 1, 2015, the rate was increased from 1.17
percent to 1.475 percent.107
The previous $85,000 wage
exclusion was also reduced to $50,000. The reduction of
the wage exclusion will expand the MBT’s base. The tax
rate for businesses engaged in mining activities in-
91
Accounting Standards Codification Topic 740, Income
Taxes (ASC 740).
92
Accounting Standards Codification Topic 450, Contin-
gencies (ASC 450).
93
Pub. L. No. 86-272 codified at 15 U.S.C. §§381-384.
94
Wash. Rev. Code. §82.04.220(1).
95
Wash. Rev. Code, §82.04.080.
96
See Washington Department of Revenue, Tax Classifica-
tions for Common Business Activities, http://dor.wa.gov/
Content/FileAndPayTaxes/BeforeIFile/
doingBus_CommonBusActivities.aspx (last accessed on Sept.
10, 2015) (listing common business activities); see also Wash-
ington Department of Revenue, B&O Tax Classifications,
http://dor.wa.gov/Content/FindTaxesAndRates/BAndOTax/
BandOrates.aspx (last accessed on Sept. 10, 2015) (listing dif-
ferent tax rates depending on the specific business activity).
97
See Union Oil Co. v. City of Los Angeles, 79 Cal. App. 4th
383 (Cal. Ct. app. 2000).
98
L.A., Cal., Mun. Code, §21.00(i).
99
Ibid. at §21.00(a).
100
Ibid. at §21.33.
101
Ibid. at §21.06(a).
102
Ibid. at §21.06.1(a).
103
S. F. Bus. and Tax Regs. §953(b) (San Francisco also
employs a Payroll Expense Tax but unlike Nevada’s MBT, the
city’s payroll tax is being phased out by 2018 (§§901; 950.8).
104
See ibid. at §952.3(a).
105
Ibid. at §953.1-9.
106
See Victoria Barrett, Payroll Tax Be Gone: Angel Inves-
tor Ron Conway Discusses Election Victory in San Francisco,
Forbes (Nov. 7, 2012), http://www.forbes.com/sites/
victoriabarret/2012/11/07/payroll-tax-be-gone-angel-investor-
ron-conways-discusses-election-victory-in-san-francisco (dis-
cussing the effects of the election).
107
Nevada Department of Taxation, Major Legislation
Overview 2015.
7

creased to match the 2 percent rate for financial institu-
tions, which remained unchanged. The MBT now pro-
vides a credit equal to 50 percent of Commerce Taxes
paid toward any liability beginning the first quarter af-
ter the first payment of the Commerce Tax.108
As the
MBT is filed and paid each quarter, a company that
timely files and pays $5,000 for example, towards its an-
nual Commerce Tax liability, would be entitled to carry
forward a $2,500 credit toward future MBT liability in-
curred throughout the year.109
This credit is limited; it
may only be used for any of the four quarters ‘‘immedi-
ately following the end of the taxable year for which the
Commerce Tax was paid.’’110
Unused credit cannot be
carried forward beyond the subsequent fourth quarter,
and the taxpayer is not entitled to a refund for any un-
used amount.111
The annual Nevada Business License Fee was also
amended by the Legislature, primarily impacting corpo-
rations.112
Effective July 1, 2015, the business license
fee increased from $200 to $500.113
The fee remains
$200 for non-corporate business entities (e.g., partner-
ships, sole proprietorships, pass-through entities, etc.)
doing business in Nevada.114
Administrative Processes. The Nevada Department of
Taxation is authorized under S.B. 483 to administer and
enforce the Commerce Tax.115
Claims for refunds are
allowed ‘‘within 3 years after the last day of the month
following the last month of the taxable year for which
the overpayment was made.’’116
No lawsuits or legal
proceedings can be ‘‘maintained in any court’’ against
the Department of Taxation or the state unless a claim
for a refund or credit has been filed.117
Taxpayers have
ninety days to challenge any final administrative action
taken by the Department and failure to bring an action
within the time specified constitutes a waiver of any al-
leged overpayments.118
Revenue Projections. The cumulative effect of all of
the changes made to Nevada’s tax regime under S.B.
483 is projected to generate $1.15 billion of additional
revenue for Nevada over the next two years.119
Of that
amount, only $243 million is expected to come from the
Commerce Tax.120
The modified MBT is projected to
add $249 million of revenue, and the increases to the
Business License Fee an extra $93 million.121
The re-
maining amount is comprised of excise tax increases on
cigarettes ($190 million) and permanent extensions of
temporary tax increases which were set to expire in
2015 is anticipated to add $375 million of additional rev-
enue.122
These excise tax extensions include the Local
School Support Tax, prepayments towards the Net Pro-
ceeds of Minerals Tax, and the Governmental Services
Tax, which is levied on car ownership.123
Thus, despite
all the attention paid to the Commerce Tax, other tax
law changes in S.B. 483, including notably the amend-
ments to the MBT, will ultimately result in greater con-
tributions to state revenue.
Proposed Regulations. Beginning on Sept. 9, 2015, the
Nevada Department of Taxation began to issue for pub-
lic comment a number of proposed regulations to give
direction and guidance beyond the plain language of
S.B. 483.124
These proposed regulations offer some
clarification on some basic taxability issues and also
provide insight into the treatment of issues relating to
nexus, being engaged in business, and Pub. L. No. 86-
272. As of the date of this writing, they remain just pro-
posals and thus, should not be relied upon.
The proposed regulations explicitly state that S.B.
483 is an ‘‘entity based tax’’ that requires a taxable en-
tity to file an annual return ‘‘even if the taxable entity
has no tax liability.’’125
Subchapter S corporations are
now included in the definition of taxable entities as they
were not previously expressly listed under the statutory
definition.126
The proposed regulations also state that
the tax ‘‘is not a tax on the customer, and the business
entity is prohibited from assessing it directly against the
customer.’’127
However, a business entity may itemize a
‘‘Commerce Tax recovery charge’’ on a receipt or in-
voice if:
s The business entity explains to its customers that
the charge is made in order to recover money paid pur-
suant to S.B. 483; and
108
Ibid.
109
See Nevada Department of Taxation, Major Legislation
Overview 2015 (example); see also Nevada Department of
Taxation, Modified Business Tax Information & FAQ’s.
110
Nev. S.B. 483 §68.4, 70.4 (S.B. 483 does not appear to al-
low for the credit to carry back); see also Proposed Regulation
of the Nevada Tax Commission, Amending Nev. Rev. Stat.
§368A and §368B at §3 to read, ‘‘[u]pon any Commerce Tax li-
ability being either partially or fully satisfied, the employer
may, provided it is within the statutory period as provided in
NRS 363A.150 or NRS 363B.150, amend any previously filed
Modified Business Tax returns periods that follow the taxable
year(s) for which the Commerce Tax payment was made, to re-
flect the qualifying credit.’’
111
Ibid.
112
See Nevada Department of Taxation, Major Legislation
Overview 2015.
113
See Nev. S.B. 483 §75.2 (amending Nev. Rev. Stat.
§76.130). Corporations organized under Chapters 78, 78A, or
78B of the NRS, or foreign corporations required to file an ini-
tial or annual list with the Secretary of State.
114
Ibid. at §75.1.
115
Ibid. at §16.1.
116
Nev. S.B. 483 §52.1(a).
117
Ibid. at §54.2.
118
Ibid. at §55.1,2.
119
See e.g., Walczak, supra note 5; Geoff Dornan, Nevada
Legislature: Assembly Passes Tax Plan 30-10, The Record-
Courier (Jun. 1, 2015), http://www.recordcourier.com/news/
16604826-113/nevada-legislature-assembly-passes-tax-plan-
30-10; Geoff Dornan, Nevada Legislature: $1.1 Billion ‘Nevada
Revenue Plan’ Approved; Largest One-time Tax Increase in
History of State, Nevada Appeal (Jun. 2, 2015), http://
www.nevadaappeal.com/news/government/16618284-113/
nevada-legislature-11-billion-nevada-revenue-plan-approved.
120
See Jared Walczak, Nevada Approves New Tax on Busi-
ness Gross Receipts, Tax Foundation (Jun. 8, 2015), http://
taxfoundation.org/article/nevada-approves-new-tax-business-
gross-receipts (Figures and table included delineate the net
revenue impact over the next biennium).
121
Ibid.
122
Ibid.
123
Ibid.
124
The proposed regulations can be found on the Nevada
Department of Taxation’s website at http://tax.nv.gov/FAQs/
Commerce_Tax (last accessed Oct. 16, 2015).
125
Proposed Regulation of the Nevada Tax Commission
(clarifying a taxable business entity and the requirements of a
taxable entity §1).
126
Ibid. at §2(a).
127
Ibid. at Commerce Tax Recovery Charge §1.
8

s The receipt or invoice indicates that the recovery
charge is included in the total price collected and not an
additional charge assessed on the customer’s total.128
The proposed regulations also attempt to further de-
fine nexus-creating activities and other ‘‘engaged in
business’’ activities. Under the proposal, being engaged
in business would include entering Nevada to ‘‘pur-
chase, place, or display advertising’’ for either the ben-
efit of another or in the ordinary course of business.129
Performing a contract in Nevada, ‘‘regardless of
whether the taxable entity brings its own employees
into the state, hires local labor, or subcontracts with an-
other’’ would also be considered to be engaged in busi-
ness under the Commerce Tax.130
Additionally, holding
companies located either in Nevada or managing, di-
recting, or performing services in Nevada for subsidiar-
ies or investee entities would be considered to be en-
gaged in business. The following activities, among oth-
ers, would also be considered to be engaged in
business:
s Leasing tangible personal property which is used
in Nevada,
s Having inventory located in Nevada, even if or-
ders are filled out of state,
s Having employees or representatives in Nevada
doing the business of the taxable entity,
s Making deliveries into Nevada of items the entity
has sold,
s Maintaining a place of business,
s Assembling, processing, manufacturing, or stor-
ing goods in Nevada,
s Holding, acquiring, leasing, or disposing of Ne-
vada real property,
s Performing any service in Nevada, regardless of
whether the employees, independent contractors, or
agents reside in Nevada,
s Staging or participating in trade shows or similar
events,
s Having a telephone service or listing that is an-
swered in Nevada, and
s Carrying freight or passengers in-state under cer-
tain conditions131
The proposed regulations also specifically address a
number of other topics, including penalty and interest
waivers of late payments of the Commerce Tax, when
trusts are deemed to be conducting business and are
subject to the Commerce Tax, deductions from health
care companies’ revenue for the cost of uncompensated
care, and situsing rules for services.132
Regarding the
situsing of revenues from the sale of services, the pro-
posed regulations attempt to clarify that they will gen-
erally be sourced to where the benefit of the service is
received. However, if services relate to various loca-
tions both within and outside Nevada, the proposed
regulations state that gross receipts may generally be
sitused to Nevada using any reasonable, consistent, and
uniform method of apportionment, which appears to al-
low for some subjectivity in the situsing of service rev-
enue.
While not addressing Pub. L. No. 86-272 explicitly,
the proposed regulations include a provision that solici-
tation of sales in Nevada by employees, contractors,
agents, or other representatives of a foreign business
entity to promote or induce sales will constitute being
actively engaged in business under S.B. 483.133
Without
expressly saying so, the regulation suggests the Depart-
ment of Taxation’s view is that the Commerce Tax is
not limited by Pub. L. No. 86-272.
Important Dates to Remember.
s The 12-month taxable year began July 1, 2015,
and will end June 30, 2016. (The taxable year for the
Commerce Tax is not the taxpayer’s taxable year for
federal income tax purposes but Nevada’s own fiscal
year.)
s The Commerce Tax return is due annually on or
before the 45th
day following the end of the taxable
year. The initial return and payment for the first tax year are due
on August 15, 2016.134
The law does not provide for any
estimated taxes.
s A business entity must determine its income cat-
egory in which the business entity is ‘‘primarily en-
gaged’’ for the initial return, which is due on August 15,
2016. 135
s The deadline to file a thirty day extension to file
for ‘‘good cause’’ with the department is August 15,
2016.136
s The ‘‘grace period’’ for filing and payment of an
initial return without assessment of penalties or interest
is February 15, 2017. Failure to comply must not be inten-
tional or due to willful neglect.137
Does It have a Future? S.B. 483 is the new law, but it
is likely to continue to cause controversy in Nevada.
Opponents of the Commerce Tax are numerous and
some are already threatening yet another ballot initia-
tive to repeal it.138
The ‘‘We Decide Coalition,’’ led by
Chuck Muth, a conservative political activist, recently
spearheaded a referendum to challenge S.B. 483 in its
entirety.139
In response, a political action committee
(PAC), the Coalition for Nevada’s Future, was formed
by supporters of Gov. Sandoval seeking to preserve the
tax reforms wrought by S.B. 483.140
The Coalition for
Nevada’s Future sought a permanent injunction to de-
128
Ibid. at §2(a),(b).
129
Proposed Regulation of the Nevada Tax Commission
(clarifying a taxable business entity and the requirements of a
taxable entity §4(a)).
130
Ibid. at §4(c).
131
Ibid. at §4(a)-(u).
132
Ibid.
133
Ibid. at §4(s).
134
Nevada Department of Taxation, Commerce Tax Ques-
tions and Answers (45 days after the end of the taxable year is
Aug. 14, 2015; however, that date falls on a Sunday and all De-
partment guidance states Aug. 15, 2015 as the deadline).
135
Nev. S.B. 483 §20.3.
136
Ibid. at §20.4.
137
Nevada Department of Taxation, Commerce Tax Ques-
tions and Answers.
138
See Chris Sieroty, Nevada Controller Ron Knecht Help-
ing to Repeal New Tax Plan, Nevada Public Radio (Aug. 4,
2015), https://knpr.org/knpr/2015-08/nevada-controller-ron-
knecht-helping-repeal-new-tax-plan; see also Geoff Dornan,
Suit Filed in Carson City to Block Petition Asking Voters to In-
validate 2015 Tax Package (Sept. 1, 2015), http://
www.recordcourier.com/news/17972328-113/suit-filed-in-
carson-city-to-block-petition.
139
See Cy Ryan, Suit Filed to Stop Nevada Tax Repeal Ef-
fort, Las Vegas Sun (Sept. 11, 2015), http://lasvegassun.com/
news/2015/aug/31/suit-filed-stop-nevada-tax-repeal-effort/
(launching a referendum drive to gather 55,234 signatures to
put the issue on the 2016 ballot).
140
Ibid.
9

clare the anti-S.B. 483 referendum invalid because it in-
cluded more than one issue which is disallowed by
law.141
Moreover, the language of the referendum was
claimed to be ‘‘inaccurate and misleading.’’142
On Oct.
1, 2015, a Nevada district judge blocked Muth’s referen-
dum, agreeing that it was in violation of the state’s
‘‘single subject’’ rule and lacked an accurate descrip-
tion.143
Before the decision, Muth’s coalition vowed to
file a new referendum that would ‘‘[S]till be targeting,
word-for-word, the entire $1.4 billion tax hike en-
meshed in S.B. 483. . .’’144
The Commerce Tax has other enemies; Nevada State
Controller Ron Knecht and his PAC, ‘‘RIP Commerce
Tax Inc.’’ have also filed a petition seeking a referen-
dum on the new tax.145
This petition is narrower in
scope, seeking to eliminate only the Commerce Tax and
not S.B. 483 in its entirety.146
If the petition is success-
ful, the referendum would be put on the November,
2016 state ballot and if that happens, the battle will be
a long one.147
If the defeat of the Education Initiative is
any indication of the public’s opinion towards the Com-
merce Tax, a referendum may prove decisive in the de-
bate.148
Despite these uncertainties, in the state where
gambling is the leading industry, the Commerce Tax is
for now Nevada’s newest business tax gamble.
141
Ibid.
142
See ibid. (citing Coalition for Nevada’s Future v. Muth,
Nev. Dist. Ct.).
143
Geoff Dornan, PAC files petition to repeal Nevada com-
merce tax, Nevada Appeal (Oct. 15, 2015), http://
www.nevadaappeal.com/news/lahontanvalley/18629227-113/
pac-files-petition-to-repeal-nevada-commerce-tax.
144
Chuck Muth, Ax the Tax Referendum Update, Muth’s
Truths (Sept. 9, 2015), http://www.muthstruths.com/2015/09/
09/ax-the-tax-referendum-update.
145
Michelle Rindels, Group files petition to repeal new Ne-
vada Commerce Tax, Reno Gazette-Journal (Oct. 16, 2015),
http://www.rgj.com/story/news/local/leader-courier/2015/10/16/
group-files-petition-repeal-new-nevada-commerce-tax/
74056846.
146
Ibid.; Geoff Dornan, PAC files petition to repeal Nevada
commerce tax, Nevada Appeal.
147
Ibid.
148
Nevada Secretary of State, Ballot Questions (showing 78
percent of the electorate voted ‘‘No’’ to the proposed margin
tax).
10

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