Modified Business Tax Information & FAQ's


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 – The tax rate for most General Business employers, as opposed to Financial Institutions, is 1.475% on wages after deduction of health benefits paid by the employer and certain wages paid to qualified veterans. However, the first $50,000 of gross  wages is not taxable.
For example: if the sum of all wages for the 9/15 quarter is $101,000 after health care and qualified veteran wage deductions, the tax is $752.25 ($101,000 – $50,000 = $51,000 x 0.01475). These are changes that became effective July 1, 2015 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.

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.

No changes were made to the tax rate for Financial Institutions which remains at 2% since its inception in October 2003.

In addition to the rate change and the deduction for qualified veteran wages 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.


Financial Institution - The tax rate for financial institutions is 2% on the gross wages less employee health care benefits paid by the employer and certain wages paid to qualified
veterans. Financial institutions are not provided the wage exemption afforded to general businesses and must report and pay tax at the 2% 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 2% rate. A new Modified Business Tax Return, MBT-Mining has been developed for this reporting purpose.

In addition to the change to the Financial Institution definition and the deduction for qualified veteran wages 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. 

 

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. Effective July 1, 2015, AB71 of the 78th Legislative Session enacted a deduction for certain wages of qualified veterans. The veteran must meet specific qualifications and provide the employer documentation regarding Unemployment Benefits received. This documentation along with a signed affidavit from the employer must be attached to the Modified Business Tax return when taking this deduction.

                    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.

                                      1.    Include a copy of the original return

                                      2.    Write the word “AMENDED” in black ink in the upper right-hand corner of the return.

                                      3.    Line-through the original figures, in black ink, leaving original figures legible.

                                      4.    Enter corrected figures, in black ink, next to or above the lined-through figures.

                                      5.    Enter amount of credit claimed (if any) or amount due.

                                      6.    Include a written explanation and documentation (such credit memos, exemption certificates, adjustments, etc.) substantiating the basis of the amendment(s).

                                      7.    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.