Nevada Tax Amnesty Coming to an End

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One of the sticking points for many of my clients with Nevada companies (located/run from outside the State of Nevada) is whether or not they are required to pay the yearly $100 business license fee. Most people don’t really like my answer (yes, you do). Many others are unaware that the rules changed a few years ago. Up until now it hasn’t really been a huge issue either. But, with the financial difficulties this state faces, along with the close of the Amnesty program on September 30th of this year, things could change.

Before the fall of 2003, if you set up a Nevada company that was operated in another state (or country), there was a very simple tax filing requirement. We filed a 1-page business license, paid a 1-time fee of $25 and that was it. But 2003 was a tough year for Nevada, and one of the revenue raisers that passed through the Legislature was a requirement that all businesses formed or registered in Nevada would now have to pay a $100/year Business License Fee. Not only that, but a late fee was established, which was another $100!

The only problem with their new revenue-raising device (well, two problems really) was (a) an antiquated computer system which runs separately from the Secretary of State, leaving the Department of Taxation without a way to cross-reference which companies paid each year and which didn’t, and (b) no law on the books to allow the Secretary of State’s office to oversee collection of the money instead. Because their records are separate, the Department of Taxation’s records are often out of date, and there isn’t much in the way of enforcement ability under current law.

Not surprisingly, without any real way to monitor filings and payments, or even chase down non-payers, there’s a huge disconnect between the number of companies that pay to file their annual report each year and those who pay their annual license fee.

However … earlier this year Nevada enacted a temporary Tax Amnesty Program, to encourage companies to pay up (and probably help Taxation to update their records). It’s set to end September 30th, 2008. Combined with our Special Session a short while ago, and a huge looming budget shortfall again for the coming year, I can see our Legislature taking the steps they should have taken back in 2003, and combining the Taxation and Secretary of State records. If that happens, you can bet Nevada will follow many other states in having renewal and the tax bill payable concurrently, and not allowing the yearly renewal without payment of the license fee.

So, if you’ve got a Nevada company, you might want to check your records to see if you’ve been keeping up its yearly business license. If not, the next 6 weeks might be a good time to check in with the Department of Taxation to see what’s owed, and get that resolved.

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