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NEVADA BUSINESS OR PERSONAL TAX – NEVADA DEPARTMENT OF REVENUE
A business corporation or LLC can be registered in any state in the USA but the one aspect that most owners, managers, and directors are worried about is the tax implication. Normally, how the income of specific businesses is taxed depend a lot on the legal form of that business. A corporation will always be taxed differently from a Limited Liability Company. If you are planning to incorporate or have formed a business in Nevada then how does Nevada business tax works?
Nevada as Tax-Free State
Nevada is considered one of the best states for registering new business or start-ups and this is more so because there is no corporate income tax. This of course doesn’t mean that there is no Nevada business tax.
The tax rate for Limited Liability Companies is one of the lowest in the nation and corporations are required to pay taxes at the federal level. The Nevada corporate tax is applied to businesses operating in the state. It is applied to the gross taxable income of majority of businesses and corporations registered in this state.
Some businesses especially “pass through entities” like an S Corporation benefit from the fact that the profit and loss is passed through from the business to the owners. As a result, there is no double taxation as instead of an S Corporation paying Nevada business tax, the owners will be subjected to personal income tax.
When it comes to paying taxes, where do you submit business or corporate tax?
Nevada Department of Taxation
The Department of Taxation of the State of Nevada is responsible for administering the collection of Nevada corporate tax or business tax. Their mission to ensure fair and effective administration of business tax programs in the state in accordance with NRS Chapter 363C, NAC 363C, and Senate Bill No. 497. The Department of Taxation aims to serve taxpayers including individuals and businesses by being committed to the highest standards of ethical conduct and professionalism.
The primary goal of the Nevada Department of Taxation is to ensure stable administration of tax statutes while providing equitable treatment to taxpayers. Some of the different types of Nevada business tax collected and distributed by the department include:
- Sales and use taxes in accordance with NRS Chapter 372, 374 and 377
- Modified business tax (MBT) in accordance with NRS Chapter 363B and NRS Chapter 363A
- Real property transfer tax
- Estate tax in accordance with NRS Chapter 375A
- Real and personal property tax on interstate and inter-county companies in accordance with NRS Chapter 361
Nevada Corporate Net Income Tax Rate
There is no Nevada corporate tax although there is a “Business License Fee or Tax” of $500 that all corporations have to submit with the office of the Secretary of State. This license fee or tax has to be paid either during incorporation or annually on the last day of the anniversary month of incorporation.
Nevada Commerce Tax
The Commerce Tax is a type of annual Nevada business tax that is imposed on those businesses that exceed $4 million in gross revenue within the taxable year. This tax is levied on the “privilege” of engaging in business in this state. You will be required to file the “Nexus Questionnaire” with the Nevada Department of Taxation to register your business for Commerce Tax.
The commerce tax has to be paid by all types of business entities except for entities exempt like Credit union, Non-profit organization, and Business entity organized pursuant to NRS 82 or NRS 84 among others. Whether you have registered a corporation or a proprietorship in the state, if your gross revenue doesn’t exceed $4 million then this Nevada corporate tax will not be levied.
Nevada Personal Income Tax Rate
To have a low tax bill is what most businesses and individual’s desire and the best way to achieve that is to live and register your business in a state that has no income tax. Nevada is one of the 7 states in the nation that does not have any personal income tax.
Average Nevada Sales Tax Rate
Businesses benefit from the fact that there is no Nevada business tax or personal income tax but does that mean, the state doesn’t levy any taxes? It does. Nevada levies sales tax, which was first adopted as a general state sales tax in 1955. Apart from the state sales tax, there are local sales taxes and special district taxes that range from 0 – 3.665 percent. The combined sales tax rate in Nevada currently range from 4.6 to 8.265 percent and this is dependent on the location of the sale like Winchester, Nevada has 4.6% tax rate while Crystal Bay, Nevada has 8.265% tax rate.
A business needs to have a “sales tax nexus” or “significant presence” in the state of Nevada in order to pay Nevada business tax or sales tax. So, when does the state consider a business to have a sales tax nexus? This is only when the following are met:
- A business has a physical office or a place of business
- The business has a warehouse that is holding tangible goods
- The business has an employee present in Nevada
- If the business delivers merchandise in the state using vehicles
- If the business owns real or personal property
- If the business has independent contractors in Nevada
Since there is no Nevada corporate tax, the sales tax is applicable for businesses and is levied on the sale of tangible goods as well as specific services. This tax is normally collected by the business that is selling goods or services and it is remitted to the Department of Taxation.