What are the two classifications of the Modified Business Tax?

1. General Business Modified Business Tax

• Tax Rate Changes:
• Effective July 1, 2023:
  • The tax rate for most General Business employers reduced to 1.17% from 1.378%.
  • The first $50,000 of wages remains non-taxable under NRS 363B.110.
  • All employers must file a tax return regardless of tax due.
• Prior to July 1, 2019:
  • The tax rate for most General Business employers was 1.378%.
  • The first $50,000 of gross wages was non-taxable.
• Prior to July 1, 2015:
  • Tax rate for most General Business employers was 1.475%.
  • The first $50,000 of gross wages was non-taxable under SB283.
• Veteran’s Wages Deduction:
• • Tax deduction for qualified veteran’s wages available until July 31, 2022.
  • Applicable to veterans employed from July 1, 2015, to June 30, 2019.
• Additional Credits and Amendments:
  • AB71 (78th Legislative Session) led to rate change.
  • AB165, SB412, and SB507 created credits against Modified Business Tax liability.
  • AB 389 amended NRS 616B.691 regarding Employee Leasing Company clients.
• Previous Tax Rate Changes:
• Prior to July 1, 2015:
  • SB475 (2013) set tax rate at 1.17% on taxable wages over $85,000.
• Prior to July 1, 2011:
  • AB561 set tax rate at 1.17% on taxable wages over $62,500.
• July 1, 2009:
  • SB 429 introduced tiered system.
• Previous Tax Rate:
• • Before July 1, 2009:
    • Tax rate for general business was 0.63% with no threshold

2. Financial Institution Modified Business Tax

• Tax Rate Changes
• Effective July 1, 2023:
  • Tax rate for financial institutions set at 1.554% on wages after health benefit deductions.
  • No wage exemption provided; tax applies to all wages at the 1.554% rate.
• Prior to July 1, 2023:
  • Tax rate for financial institutions was 1.853% on wages after health benefit deductions (effective July 1, 2015).
• Inclusion of Taxpayers under SB 483:
  • SB 483 (78th Legislative Session) expanded the definition of Financial Institutions to include Taxpayers subject to Net Proceeds of Minerals Tax (NRS 362.100 to 362.240).
  • These Taxpayers are liable for tax at the 1.554% rate.
  • A new Modified Business Tax Return, MBT-Mining, was introduced for reporting purposes.
• Credits and Amendments:
  • AB71 (78th Legislative Session) introduced changes to the Financial Institution definition.
  • AB165, SB412, and SB507 created credits against Modified Business Tax liability.
  • Approval and credit notice from the Department required for these credits.
• Previous Tax Rate:
• Prior to July 1, 2015:
  • Tax rate for Financial Institutions remained at 2% since inception in October 2003.

What entities qualify as Financial Institutions?

• According to NRS 363A.050, a financial institution is defined as institutions licensed to operate in Nevada under specific NRS titles, certain licensed individuals, and those holding specific permits or licenses.
• If you are affiliated with any of these entities, you are also considered a financial institution. It is important to check this definition to see if you need to register as one, as outlined in NRS 363A.050.
• AB 103 from the 78th Legislative Session changed this definition to exclude individuals primarily involved in selling, soliciting, or negotiating insurance.
• If you are licensed under NRS 368A.050 and also sell insurance, you must confirm that over 50% of your income comes from insurance commissions and notify the Department if 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 you are challenging the classification, and any financial records and documents that can substantiate your 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, 2023 through December 31, 2023 was due on or before January 31, 2024.
• 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.