The
following information is for general guidance only. Please be advised that
any information made available through FAQs cannot change controlling statutes
or regulations and any such information is not intended to constitute “written
advice” for purposes of NRS 360.294. To obtain written advice, please
request an advisory opinion.
Overview:
Every employer who is subject to Nevada Unemployment Compensation Law (NRS
612) is also subject to the Modified Business Tax on total gross wages less
employee health care benefits paid by the employer. Total gross wages are the
total amount of all gross wages and reported tips paid for a calendar quarter
as reported to the Employment Security Division on form NUCS 4072. Exceptions
to this are non-profit organizations, Indian Tribes, political subdivisions, and
employers with household employees only.
Modified Business Tax has two classifications:
General Business – Effective July 1, 2023, the
tax rate for most General Business employers, as opposed to Financial
Institutions, was reduced to 1.17% from 1.378% on wages after the deduction of
health benefits paid by the employer. The first $50,000 is still not taxable
pursuant to Nevada Revised Statute (NRS) 363B.110. For example: if the sum of
all wages for the 9/15 quarter is $101,000 after health care deductions, the
tax is $596.70 ($101,000 – $50,000 = $51,000 x 0.0117). A tax return will still
need to be filed by all employers, even if the taxable wages are less than
$50,000 and tax due is $0.
Prior to July 1, 2023, the tax rate for most General Business
employers, as opposed to Financial Institutions was 1.378% on wages after the deduction
of health benefits paid by the employer effective July 1, 2019. The first
$50,000 of gross wages was not taxable pursuant to NRS 363B.110.
Prior to July 1, 2019, the tax rate for most General Business
employers was 1.475% on wages after the deduction of health benefits paid by
the employer effective July 1, 2015. The first $50,000 of gross wages was not
taxable pursuant to SB283 of the 2015 legislative session. A tax return will
still need to be filed by all employers, even if the taxable wages are less
than $50,000 and tax due is $0. Additionally, a tax deduction for qualified
veteran’s wages became available to be used on tax returns through July 31,
2022, for veterans employed on or after July 1, 2015, and on or before June 30,
2019. In addition to the rate change pursuant to AB71, the 78th (2015)
Legislative session also enacted AB165, SB412, and SB507 that created certain
credits a taxpayer may be able to take against their Modified Business Tax
liability. These credits all require prior approval and a credit notice from
the Department before they can be taken. Please see the legislative website at www.leg.state.nv.us for
further information regarding these bills. AB 389 of the 78th Legislative Session amended NRS
616B.691 to make the client of an Employee Leasing Company the employer of the
leased employees for purposes of NRS 612.
Prior to July 1, 2015, SB475 of the 2013 Legislative Session
amended the tax rate to 1.17% on taxable wages over $85,000 and prior to July
1, 2011, AB561 amended the tax rate 1.17% on taxable wages over $62,500. On
July 1, 2009, SB 429 created the tiered system. The sum of all taxable wages,
after health care deduction, paid by the employer not exceeding $62,500 for the
calendar quarter was calculated at 0.5%. If the sum of all the wages paid by
the employer exceeded $62,500 for the calendar quarter, the tax was $312.50
plus 1.17% of the amount the wages exceeded $62,500. The tax rate for general
business prior to July 1, 2009, was 0.63% with no threshold.
Financial Institution – Effective July 1, 2023, the
tax rate for financial institutions is 1.554% on wages after the deduction of
health benefits paid by the employer. Financial institutions are not provided
the wage exemption afforded to general businesses and must report and pay tax
at the 1.554% rate on all wages less the deductions. SB 483 of the 78th Legislative
Session included Taxpayers who are subject to the Net Proceeds of Minerals Tax,
NRS 362.100 to 362.240, in the definition of Financial Institutions and
therefore liable for the tax at the 1.554% rate. A new Modified Business Tax
Return, MBT-Mining has been developed for this reporting purpose.
Prior to July 1, 2023, the tax rate for Financial Institutions was
1.853% on wages after the deduction of health benefits paid by the employer
effective July 1, 2015. In addition to the change to the Financial Institution
definition pursuant to AB71, the 78th (2015) Legislative
session also enacted AB165, SB412, and SB507 that created certain credits a
Taxpayer may be able to take against their Modified Business Tax liability.
These credits all require prior approval and a credit notice from the
Department before they can be taken. Please see the legislative website at www.leg.state.nv.us for
further information regarding these bills.
Prior to July 1, 2015, no changes were made to the tax rate for
Financial Institutions which remained at 2% since its inception in October
2003.
What
entities qualify as Financial Institutions?
NRS 363A.050 defines a financial institution and lists 19
different categories including an institution licensed, registered or otherwise
authorized to do business in this State pursuant to the provisions of title 55
or 56 of NRS or chapter
604A, 645B or 645E of
NRS, or a similar institution chartered or licensed pursuant to federal law; a
person licensed or registered or required to be licensed or registered pursuant
to NRS 90.310, 90.330, 90.453, 686A.340 or 688C.190 ;
and a person holding or required to hold a solicitation permit or license
pursuant to NRS
692B.040, 692B.190 or 692B.260;
This definition also provides that if you are an entity related to
any of the listed persons or entities, you are a Financial Institution. You
should review the definition of Financial Institution to determine if you are a
person or entity who should be registered as a Financial Institution. You can
find the definition of Financial Institution at NRS
363A.050. AB 103 of the 78th Legislative Session amended the
definition of Financial Institution to exclude a person who sells, solicits, or
negotiates insurance and whose business primarily consists of the sale,
solicitation, or negotiation of insurance. As a result, entities licensed as
described in NRS 368A.050 who also sell insurance must certify that over 50% of
their income is from insurance commissions and must inform the Department when
this changes.
How is it be determined that a business qualifies as a Financial
Institution?
The Department primarily looks to see what the entity is licensed
or registered for. Modified Business Tax is a self-reporting tax, and you are
responsible for properly characterizing your business as a Financial
Institution or General Business. However, the Department will classify
taxpayers when it discovers through account review, audit, a lead or other
research that a company falls into one of the definitions under NRS 363A.050.
How do I dispute my classification as a Financial
Institution?
A dispute may be made by filing a petition through a letter with
the Department. The petition must include a description of the business, a
statement of all the grounds upon which the person challenges the
classification, and such financial records and documents as may be necessary to
substantiate the claim.
Who is affected?
All Employers.
How do I register for this tax?
When you register with the Nevada Employment Security Division (ESD) for
Unemployment Compensation for your employees you are automatically registered
with the Department of Taxation for Modified Business Tax. You will start
receiving tax returns from the Department of Taxation. They will be sent to you
at the same address you have registered with the Employment Security Division.
If you would like your Modified Business Tax returns to be sent to a different
address you must notify the Department of Taxation by phone or in writing.
Who do I pay this tax to?
This tax is paid to the Department of Taxation.
When is the tax due?
Tax for each calendar quarter is due on the last day of the quarter and
is to be paid on or before the last day of the month following the quarter. For
example, the tax return and remittance for October 1, 2006 through December 31,
2006 was due on or before January 31, 2007. A return must be filed for each
period even if no gross wages were paid during the period.
Do I also pay the unemployment compensation contributions to the Employment Security Division?
Yes.
What are gross wages?
Gross wages are the total wages paid by the employer during the calendar
quarter. This amount should include reported tips.
Is there a cap on the gross wages?
No, there is no cap, or limit, on the gross wages.
Are there any allowable deductions from gross wages?
Yes. There is a deduction for qualified health insurance/health benefit plans for employees paid by the employer. This does not include premiums being repaid to the employer by the employee.
Are employees’ dependents included in the allowable deduction?
Yes, if the premiums, claims, etc. are paid by the employer.
Are employee dental and vision insurance premiums considered allowable health insurance/health benefit plan?
Yes, as long as they are paid by the employer.
My company is self-insured; does that qualify for the deduction?
Yes. There is a provision for amounts paid for claims and direct
administrative services costs.
What about amounts paid by an employer to a Taft-Hartley Trust for participation in an employee welfare benefit plan?
These amounts would also qualify for the deduction.
What if the amounts paid for premiums, claim, etc. exceed the amount of gross wages for the quarter?
The excess amount may be carried forward to be applied as an offset to
the gross wages in the following quarter.
Do amounts paid for health care or premiums paid for insurance for any industrial injury or occupational diseases qualify for the deduction?
No.
Can I deduct these taxes from the employee’s wages?
No.
What if I, as an employer, pay $300 per employee per quarter for health insurance premiums, and the employee pays $100 per quarter for a total of $400 paid to the insurance company. How much can I deduct from gross wages?
You can deduct $300 per employee per quarter.
If I do not own a business but I hire domestic help in my home, am I required to pay this tax?
Effective July 1, 2005 you are considered to be a consumer of service
only and not required to pay this tax on their wages, even if the wages are
over $1000 a calendar quarter.
What if I make a mistake- how do I amend my return?
To communicate
amendments or corrections that need to be made on a tax return, an 'amended
return' must be mailed to the Department reflecting these changes in the
following manner.
- Include a copy of the
original return
- Write the word “AMENDED”
in black ink in the upper right-hand corner of the return.
- Line-through the
original figures, in black ink, leaving original figures legible.
- Enter corrected figures,
in black ink, next to or above the lined-through figures.
- Enter amount of credit
claimed (if any) or amount due.
- Include a written explanation
and documentation (such credit memos, exemption certificates, adjustments,
etc.) substantiating the basis of the amendment(s).
- If the amended return
results in a credit, a credit will be used first to satisfy current liabilities
or future liabilities unless a refund is specifically requested. Please note on
the amended return if you are requesting a refund.
If additional tax is
due, please remit payment along with applicable penalty and interest
The Department will send
you a written notice when a credit request has been processed and the credit is
available for use or refund. Please do not apply a credit to future returns
prior to receiving Department notification that the credit is available.