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Nevada Governor Releases Outline of Revised Tax Plan

2 min readBy: Liz Malm, Joseph Bishop-Henchman

Nevada Governor Brian Sandoval has proposed a revised taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. plan that combines elements from his earlier proposed restructuring of the state Business License Fee (SB 252) and alternative plans floated in the Assembly that focus on the state’s Modified Business Tax (MBT) and the existing BLF structure (AB 464). See the Revised Plan’s press release here and the presentation outlining the plan here.

The Revised Plan has three main components. It would:

  • Increase the current Business License Fee (BLF) from a flat $200 for all businesses to $300 for non-corporations and $500 for corporations (expected to raise $46.3 million in net new revenue);
  • Re-structure the state’s existing payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. , known as the Modified Business Tax, by increasing the general business rate from 1.17 percent to 1.475 percent, reducing the exemption level from $340,000 ($85,000 per quarter) to $200,000, creating a new credit for 50 percent of Commerce Taxes paid, and retaining the higher 2 percent rate for financial institutions, while also adding mining companies to this higher-rate category (estimated to bring in $516 million in net new revenue); and
  • Create a new tax called the Commerce Tax, a gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. with different rates for different industries paid by firms with in-state revenues exceeding $3.5 million, and includes a credit for MBT paid (expected to raise $60.7 million in net new revenue).

Also worth noting are plans proposed by Assembly Minority Leader Marilyn Kirkpatrick that would make structural changes to the state’s Live Entertainment Tax (AB 392 and AB 393), broadening its base and removing some of the arbitrary provisions that exist in its current form. These should be part of this year’s tax reform efforts.

In a March 26th report, we identified 12 serious issues with the Governor’s original gross receipts tax proposal. Here we evaluate which have been fixed under the Revised Plan (click table to enlarge).

We’ll continue to update this table as more information is released. More on Nevada here. Follow Liz and Joseph on Twitter at @elizabeth_malm and @jdhenchman, respectively.