Overview:
Use Tax, the counterpart of Sales Tax, is imposed upon the storage, use
or other consumption in this State of tangible personal property purchased from
a retailer. Use Tax is not imposed when the sales of the property to the
consumer is subject to the Sales Tax. For the most part, Use Tax rather than
Sales Tax, applies to property purchased ex-tax outside of Nevada for storage,
use or other consumption in Nevada from other than a seller registered in
Nevada. Use Tax, applies to mail order, out-of-state, toll-free “800” numbers,
purchases made on the internet and other purchases of tangible personal
property on which Nevada Sales Tax has not been paid
Who is affected?
All taxpayers.
What is Use Tax?
Use Tax is the counterpart of Sales Tax and the tax rate is the same as the sales tax rate in the county the property is used in. It is imposed on tangible personal property used in Nevada on which Sales Tax has not been paid. Any individual, business, corporation, or other entity can be liable for Use Tax when Sales Tax was not collected by the seller. This happens when purchasing furniture, equipment, or supplies from an out-of-state vendor, via the internet, mail order, or toll-free numbers. Any purchase other than inventory for resale, is subject to Use Tax and must be reported to the Department of Taxation. Any Sales Tax legally collected in another state will be applied towards any applicable Nevada Use Tax NRS 372.185, NAC 372.055
Is Use Tax something new?
No. Taxpayers are often less familiar with Use Tax than with Sales Tax. Nevada first
imposed a Use Tax in 1955. All states which impose a Sales Tax also
impose a companion Use Tax.
Why is Use Tax important?
Nevada Use Tax is important because it protects Nevada businesses from a
competitive disadvantage with out-of-state vendors. If a Use Tax provision did
not exist, Nevada businesses would be undercut by out-of-state vendors. Use Tax
puts in-state and out-of-state businesses on the same competitive footing. Use
Tax also helps generate the funds needed to provide services such as police and
fire protection, road construction and repair, and it funds schools.
Who is liable for Use Tax?
Any individual, business, corporation, or other entity is liable for Use Tax, when Sales Tax is not collected by the seller and the item is delivered in Nevada. Use Tax is not just applicable to businesses. Below are examples in which Nevada Sales Tax is not collected by the seller and therefore, Use Tax is due from the purchaser:
- An individual orders furniture from an out-of-state dealer who delivers or ships it to a location in Nevada
- An individual purchases clothing, shoes, or accessories from an internet site that delivers or ships the items to a Nevada resident
- An individual purchases an off-highway vehicle in another state and signs an affidavit in the state affirming that the vehicle will be used and stored in Nevada.
- An out-of-state resident purchases a vehicle, vessel, or aircraft from an out-of-state dealer who delivers the property to Nevada to be used by the individual or individual’s company operating in Nevada
- A contractor orders a truckload of sheet rock from an out-of-state vendor who delivers or ships the sheet rock to Nevada for the contractor’s construction job in Nevada
- A Nevada business orders a computer system from an out-of-state dealer who delivers or ships the system to the Nevada business address
- A Nevada business orders equipment, reference materials, office supplies, or furniture from an out-of-state vendor to be used in Nevada
Don’t all companies automatically add Sales Tax to taxable out-of-state, internet, mail order, and telephone purchases?
No. Some companies do
because they are registered to collect Nevada Sales Tax. If a seller is not
registered to collect and remit Nevada Sales Tax, the Nevada purchaser must pay
Use Tax directly to the Department of Taxation.
Is there a credit for Sales or Use Tax paid to another state?
Yes. Nevada does recognize Sales Tax paid to another state. However, if the Sales Tax paid is less than the rate in the Nevada county then the difference needs to be reported as Use Tax.
How do I know what is taxable?
Taxable items are tangible personal property transferred for value. This
includes property purchased for lease or rent, other than real estate. Most
goods, wares and merchandise are taxable in Nevada. Unprepared food is exempt.
How do I report and pay Use Tax if I am not a retailer or in business?
A Use Tax liability, of a person not in business, may be reported on a one-time return available at any Department of Taxation office. There is no charge for a consumer's certificate. Use Tax liability may also be satisfied by sending a letter or invoice stating the purchase price and submitting the Use Tax payment at the same rate as the sales tax. Those who regularly incur Use Tax liability should register and obtain a consumer's Use Tax certificate if they don’t already have a sales permit. Non- retail businesses that hold a State Business License must report and remit Use Tax with their yearly or quarterly Consumer Use Tax Return.
What if Use Tax is not paid?
The Department of Taxation may issue an assessment for Use Tax
liability. Interest will be imposed at the rate of 1% per month prior to July
1, 2011 and .75% effective July 1, 2011 and after. A penalty of no more than
10% per month will also be assessed in addition to the tax. If there is
evidence of intent to evade Use Tax, a 25% penalty can be assessed. If
the intent to evade Use Tax pertains to a vehicle, vessel, or aircraft, a 300%
penalty can be assessed.
How does the Department of Taxation identify those who have Use Tax liability?
The Department can
identify those who owe Use Tax by various methods. These include routine
audits, special audits, self-assessment programs, complaints, reports, investigations
and by obtaining lists of out-of-state purchases through the cooperation of
vendors and taxing authorities in other states.
I am a contractor bidding a job in Nevada. Are both the materials and labor subject to tax? I am doing this job for a governmental agency. How do I buy my materials tax exempt?
In Nevada, construction
contractors are considered the consumers of all materials used in fulfilling a
construction contract for improvement to real property. This is the case,
regardless of the contractor entering into a contract with an exempt
entity. Nevada Sales Tax exempt status given to governmental, religious,
charitable, or educational entities does not extend to contractors or
sub-contractors with whom they contract. A construction contractor owes
either Sales Tax or Use Tax on the cost of the materials used to fulfill a
construction contract. If a construction contractor pays Sales Tax at a
rate equal to or greater than Nevada's, no further tax liability exists.
The Department will allow a credit toward the amount due in this state in an
amount equal to Sales Tax legitimately paid to a state or local government
outside of Nevada. If Sales Tax is paid at a rate less than Nevada's, the
contractor owes Use Tax on the difference between the two rates.
Are boats, watercraft, motor vehicles and off highway vehicles purchased in another state through mail order, over the internet and toll free “800” numbers subject to Nevada tax?
Yes. In order to register or operate all boats, watercraft, off highway
vehicles and motor vehicles (cars, trucks, and motorcycles) in Nevada, proof
that Sales Tax has been paid to Nevada or another state is required. If proof
cannot be provided, Use Tax must be paid.
Do retailers also owe Use Tax?
Yes. Any purchase, other
than inventory, made by a retailer from a non-registered vendor, for use in the
business, is subject to Use Tax and must be reported on the monthly or
quarterly Sales and Use Tax return. Examples of this are supplies, forms, or
equipment that is not re-sold. Any items taken from inventory for use in the
business are also subject to Use Tax. Any items given away for free as part of
doing business are subject to Use Tax payable by the business giving it away.
However, effective July 1, 2007, items with a nominal value that are given away
at conventions, trade shows, & public events are not subject to Use Tax.