Have you received your Welcome Letter from the Nevada Department of Taxation yet? The letter is to inform businesses about the requirement to file the new Commerce Tax return. Even though no tax is owed if your gross revenue is under $4,000,000, a Commerce Tax return is still required. And the problem is that the State can only send the Welcome Letter to those businesses that it knows about – those that have registered with the Secretary of State. In fact, many people, sole proprietors and rental property owners, for example, will be required to file the return and may not even know because they did not receive the Letter.
What is the Commerce Tax?
A tax imposed on the right to “engage in business” in Nevada. And businesses subject to the commerce tax include limited liability companies, corporations, and other entities registered with the Nevada Secretary of State, as well as sole proprietors and any person filing a schedule E, part 1 on their 1040 income tax return.
“Engaging in Business”
The definition of “engaging in business” not only applies to business conducting or continuing a business in Nevada, but also includes “commencing” a business in Nevada. You are also required to file a return even if you are a sole proprietor that is exempt from the Nevada Business license or even if you just have a single rental property. Under this new tax, rent is not considered passive.
Even if your corporation is registered with Nevada but makes $0 revenue, you still need to file the return. “Commencing” a business in Nevada includes registering the business with Nevada’s Secretary of State. So, unless your entity falls within a specifically exempt category, just the fact that it is registered with the State means a return is requires.
When is the Commerce Tax Return Due?
Since the State legislature couldn’t wait for the end of the calendar year, which most businesses use, they made the fiscal year for the Commerce Tax run from July 1 through June 30. The return is due 45 days following the close of the tax year, so that is August 15, 2016 for this first year.
There is a potential 6 month grace period for this first year. But this waiver is available if the failure to file occurred even though you exercised ordinary care and the failure to file was not intentional or due to willful neglect; in other words, excusable neglect. A request for the waiver is reviewed on a case by case basis.
What if Your Gross Revenue is Less Than $4,000,000?
You still must file the commerce tax return. But compliance is fairly simple. Just log into the Nevada Tax Center system and do the following:
- Select the tax year you are filing for
- Select the proper NAIC code category (there’s a drop down menu)
- Check the box for “under $4,000,000”
- Check the “under penalty of perjury” box
- Submit the return
Don’t get caught unaware of this new business tax and the need to file a return even if your business won’t owe any tax. Failure to file the return could result in penalties and interest. To learn more, go to Nevada’s Department of Taxation website where they post a series of frequently asked questions.