Dissecting the Sandoval Tax

(Roger Stockton) – During his 2015 “State of the State” address, Nevada Governor Brian Sandoval laid out his ambitious plans to raise State revenue to primarily fund education. This week, we had the first opportunity to read his proposed “Business License Fee” that as written, will generate over $600 million in new revenue for the Silver State.

The new plan will affect every business owner in Nevada with a graduated fee structure based on gross income. Gross income is defined as all income, revenues and receipts before deduction of costs of goods sold, payroll, insurance, building maintenance, and other costs of doing business. Regardless of whether your business makes or loses money, you will have to pay the fee based on your gross receipts, not net profits.

In 2014, Nevada voters overwhelmingly rejected a similar ballot issue calling for a new tax on gross receipts by nearly 80%. The resurrection of the gross receipts tax was introduced as Senate Bill 252 by the Governor’s office last Wednesday. The fight now moves to the Nevada Legislature where the bill must pass with a two-thirds vote of both the State Senate and the State Assembly.

The new business license “fees” will be administered by the Nevada Dept. of Taxation and every business in the State will have to file quarterly “fee” returns with the Dept. of Taxation accompanied with their quarterly “fee” payment. The new annual gross receipts “fee” will cost businesses between $100 per year to over $1 million per year. Currently, every business in Nevada pays a flat $200 business license fee to the Secretary of State’s office.

Missing from SB 252 is any mention of the money going to fund education initiatives. The only mention of where the money goes is indicated in Section 14 of the bill which states:

Section 14.

2. Deposit all fees, interest and penalties it receives pursuant to this chapter in the State Treasury for credit to the State General Fund.

I assume that the Governor who campaigned against the gross receipts ballot initiative  is asking us to trust him that the money will be spent where he promised.

One of the more troubling issues this new “fee” raises is that it will add costs for businesses at each stage from manufacture to sale. Let’s take a hypothetical onion as an example. Believe it or not, Nevada is one of the country’s largest onion producers and those onions also show up on the shelves of Nevada grocery stores.

The onion grower is subject to the gross receipts “fee” and will pay up to an additional annual “fee” of $203,296 per year to the State for the privilege of growing onions on privately owned land in Nevada. Since the onion will not move itself, it must be transported to a storage facility, normally by truck. The trucking company will be subject to a new annual “fee” up to $653,450. The owner of the warehouse facility that will store the onion will now have to pay an additional “fee” of up to $413,045. Next, the trucking company will transport the onion to the wholesaler who will be subject to a new annual “fee” of up to $325,918.

The wholesale company will now send the onion to the retail outlet where the onion will finally be available for us to purchase it. The retail store will now have to pay an additional “fee” of up to $358,187. Remember that these “fees” are not on profit but on gross receipts which includes the cost of planting, irrigation, weeding, fuel, equipment maintenance, food safety compliance, harvest, packaging, tires, building costs, , employee costs, etc.

If you want your onions in the form of onion rings at a restaurant, I should add that they will be on the hook for a new annual “fee” of up to $626,021. Your onion will also be affected by increases in the “fees” for the insurance industry, up to $359,801, the waste management industry, up to $847,065 and the telecommunications industry, up to $974,528.

Does anyone think we will be paying the same price for the onion if this new “fee” plan is implemented. The same scenario applies to everything we purchase and begs the question, “why would a business grow onions in Nevada when they can operate more economically in another State?”

I would respect the Governor more if he would just call this tax, a tax.

Save Nevada gives information on what the bills are  for and on what bills are heading for votes. For more information, visit www.savenevada.com.