Gross receipts, the basis of a proposed business tax now being considered by the Nevada legislature, has finally been defined.
That definition, however, is still open to interpretation and will need to be clarified by the state's Tax Commission that oversees Nevada's Department of Taxation.
The definition of gross receipts, and exemptions from the related tax, are outlined in the governor's long-range tax bill that was the focus of meetings held by the Senate Taxation Committee last week.
The bill - Senate Bill 238, which is identical to Assembly Bill 243 - says the tax department must ensure that the tax "is applied only to business that has a substantial nexus in this state; does not discriminate against interstate commerce; and is fairly related to the presence and activities of the business entity within this state." The interpretation comes in the exact definition of nexus.
Chuck Chinnock, executive director of the tax department, said it would involve only those revenues generated inside Nevada by businesses with a significant presence here, which would include personnel and tangible property.
"A lot of those nexus questions will be in front of the commission," said Michael Hillerby, deputy chief of staff in the governor's office, during testimony before the committee.
The 113-page bill also identifies exemptions from the tax.
They include any revenue from the sale of agricultural products at wholesale; any money made by a single person from the rental of not more than four residential units; and any taxes prohibited by the state's constitution.
The latter includes, for example, a tax on the value of mined minerals.
The bill goes on to describe deductions from the tax.
They include passthrough revenues, such as those collected by travel agents and real estate brokers; bad debt; money received for insurance claims; and interest derived from government bonds.
"These mirror the federal income tax deductions," said Hillerby.
Hillerby said the bill's taxes do not tax revenue that is currently taxed by the state in some other way, such as insurance premiums, which are already subject to the insurance premium tax.
Hillerby also answered another lingering question about the tax, asked by Sen.
Dean Rhoads (R-Northern Nevada) during Tuesday's meeting.
"Do you have to file anything if your revenues are under $450,000?" asked Rhoads.
The proposed tax would only be on a business' revenue above $450,000, which its proponents claim would protect small business and exclude about 60 percent of the state's businesses.
The tax would be paid on a quarterly basis, and businesses would receive notice as they do with the state's business license tax, said Chinnock.
If the business' revenue or projected revenue did not exceed the ceiling then a business would simply return the notice, checking off the item that indicates that.
The process would not require an accountant, said Chinnock.
The bill included a few minor changes from the testimony given by the governor's staff at an earlier meeting.
The amusement and admission tax has been dropped from 7.3 percent to 7.25 percent, and now excludes movie and game rentals.
And the business license tax formula has been changed.
Originally, the governor proposed tripling the BLT to $75 per full time equivalent per quarter, and reducing that to $140 per FTE annually, with a $100 credit per FTE for those businesses paying the gross receipts tax after that tax was initiated.
But the Legislative Counsel Bureau, which drafts legislation, said such a credit was unconstitutional, according to Hillerby.
So the final bill is for a reduction to $80 annual fee per FTE for all businesses once the gross receipts tax takes effect.
The senate committee, which had invited members of the Assembly Taxation Committee to sit in, hurried through the bill after most of its meeting was consumed by testimony on SB 237, a tax bill covering huge transportation projects in Clark and Washoe Counties.
That bill was passed out of the committee.
The senate committee will continue hearing testimony on SB 238 this week.
The tax committees also have to decide on the governor's short-term tax bill for raising additional revenue for fiscal year 2003 before an April 1 deadline.
