Long known for having no income tax and being a popular choice for incorporating a business, Nevada has some big changes underfoot that could affect you if you run a business (or are incorporated there).

Big News: a Commerce Tax

Nevada recently implemented a commerce tax that applies to every business that is engaged in business in the state. The good news is: while you have to file a tax return, you don’t actually have to pay any tax unless your gross revenue in Nevada for the taxable fiscal year is over $4 million.

The tax rate depends on the industry you’re in, but ranges from 0.051% for Mining, Quarrying, Oil, and Gas Extraction businesses to 0.331% for businesses in Rail Transportation.

The Details

Nevada’s taxable fiscal year starts on July 1 and ends June 30. If you use a different taxable year to report your revenue for taxes, you’d use your internal records to calculate and report your gross revenue in Nevada for the fiscal year used in the state.

Remember: even if you don’t bring in more than $4 million, you still have to file your tax return. The return (and commerce tax, if you owe it) are due within 45 days of the end of the fiscal year, which means they’re due August 15. The first time you’ll need to file and pay will be in 2016 (for 2015 taxes).

The commerce tax applies to every type of business structure, including sole proprietorship, partnership, LLC, and corporation.

Incorporating in Nevada

As part of the bill that passed the commerce tax into action, the Nevada business license fee for corporations was also raised from $200 to $500. If you’re doing business in Nevada, expect your next business license renewal to jump up.

How This Affects You

If you run a  business in Nevada, you’ll be subject to filing your tax return, and possibly paying the commerce tax. If you incorporated in Nevada but operate your business elsewhere, you’ll be subject to the same rules.

Many people try to “game the system” by incorporating in a state with no income tax, but the truth is: that strategy can be more of a headache than a help. Because you’re incorporated in one state, you’re subject to that state’s fees and paperwork for out-of-state businesses. And you are still subject to the tax laws where you do business, and will have to pay corporation maintenance fees there. It’s less headache and less paperwork to incorporate in the state where you do business.

If you’re thinking about starting a business in Nevada, download our free Nevada state business guide to help you!

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