10 June 2016 Nevada Commerce Tax repeal measure will not be on the November ballot — taxpayers reminded of August 15, 2016 due date After defeats in Nevada's courts, proponents of a ballot initiative to repeal the Nevada Commerce Tax, which was enacted in 2015, have apparently abandoned their attempt to repeal the gross receipts tax this year. At the same time, the Nevada Department of Commerce has issued final regulations and draft filing forms. Companies doing business in Nevada and subject to the tax are reminded that their first annual return is due August 15, 2016, unless they request an extension Since inception, the Commerce Tax has been controversial. Its enactment marked the biggest expansion of Nevada's tax base since the enactment of the Modified Business Tax (MBT) (on payroll) was adopted in 2003. The Commerce Tax also was signed into law on the heels of a 2014 ballot referendum where nearly 80% of Nevada's electorate voted against adopting a margins tax styled after Texas' franchise tax. Last fall, two competing ballot referendum petitions to repeal the Commerce Tax were initiated. Conservative political activist Chuck Muth initiated the first petition. He sought to challenge the Commerce Tax and other related amendments to Nevada's current tax regime. His petition was immediately challenged by a political action committee (PAC) formed by supporters of the Commerce Tax known as the Coalition for Nevada's Future (the Coalition). The Coalition sued for a permanent injunction on the grounds that this referendum violated the Nevada constitution's "single subject" rule, which limits the scope of any single legislative initiative. In October 2015, a Nevada district court judge agreed with the Coalition and blocked Muth's referendum. Shortly afterwards, Nevada State Controller Ron Knecht and his PAC, "RIP Commerce Tax Inc." filed a petition seeking a referendum on the Commerce Tax. This second petition was narrower in scope, seeking only to eliminate the Commerce Tax and not the entirety of SB 483 which had, in part, enacted the Commerce Tax. Once again, the Coalition sued for an injunction, but the Nevada district court sided with RIP Commerce Tax and allowed the petition to continue. The Coalition appealed the district court ruling to the Nevada State Supreme Court (Supreme Court). The Supreme Court heard oral arguments in early May and determined soon after that the description of the initiative failed to properly inform the public of the state budget impact of the initiative requiring that the petition be rewritten and resubmitted to the public for the requisite signatures. The petitioners submitted a rewritten description on May 20, 2016, but were given only four weeks to obtain the 55,234 signatures needed to qualify the initiative for the November 2016 ballot. In response, Ron Knecht and his PAC have decided to abandon their campaign and instead turn their attention to the November legislative elections hoping to elect new state legislators who might overturn the Commerce Tax. For now, the legal battle to repeal the Commerce Tax appears to be over, at least for this year. The first Commerce Tax return is due 45 days following the end of Nevada's fiscal year, which ends June 30, 2016. This year, the first return is due August 15, 2016. The measure of the tax is on Nevada gross receipts in excess of $4 million earned from July 1, 2015 through June 30, 2016. Over the last several months, Nevada's Department of Taxation issued draft regulations for the Commerce Tax which were open to public comment. It also conducted at least six public workshops at which the public was provided the opportunity to discuss the draft language. The regulations (LCB File No. R123-15) have since been finalized. The Department has yet to issue a final draft of the return or return instructions, but draft forms are available to public. As these forms are not final, taxpayers should not rely on them and they should be used only for general guidance. The Department also has created several forms to assist taxpayers in the registration process, including a nexus questionnaire. The Department issued a nexus questionnaire to assist companies in determining whether their in-state activities give rise to nexus for Nevada Commerce Tax purposes. In a recently published FAQ, the Department stated that a "minimum connection" with Nevada is necessary for a business to be subject to the Commerce Tax under Section 16 of the adopted regulations. This nexus questionnaire is informational in nature and does not need to be filed with the state. The Department has made clear that taxpayers that have nexus with Nevada are still obligated to file returns even if they do not have Nevada gross receipts that exceed the $4 million threshold over which tax is due. The Department is soon expected to release more draft regulations for further consideration by the public and ultimately, adoption.
Document ID: 2016-1026 | |||||||
