(Michael Chamberlain/Nevada Business Coalition) – Just like two oarsmen in a boat rowing in opposite directions, far too often government seems to be working against itself. Elected officials talk about promoting job creation and enticing companies to Nevada. At the same time they pass laws and impose regulations that make it more difficult for companies to survive in the Silver State and discourage firms from setting up shop in the first place.
Nevada law requires all businesses operating in the state to obtain a state business license, which includes a $200 fee. The law exempts small home-based businesses with less than $27,000 in annual net income.
In an attempt to crack down on what Secretary of State Ross Miller claims to be rampant abuse of this exemption, earlier this month his office implemented new policies for businesses to obtain it. But Miller is overstating the problem and implementing solutions that will have negative unintended consequences while being more restrictive than the law allows.
Miller’s office has made much of its efforts to clamp down on businesses illegally claiming the exemption. A report on its website indicates it believes the state could be losing tens of millions of dollars in revenue as a result of this problem. At $200 each, 50,000 businesses would have to be in violation to cost the state $10 million. Considering that only 60,000 business claim this exemption this claim is highly unlikely.
The report claimed that its own internal investigation had uncovered widespread improper use of the home-based business exemption. It uses the results to demonstrate the scope of the problem.
However, this was an investigation of businesses the Secretary of State’s office had reason to suspect were in violation of the law, not a survey of a random sample of businesses. Any attempt to expand the findings to apply them to the broader population of businesses is simply not legitimate. It would be akin to declaring soccer to be America’s favorite sport after polling only people attending soccer games.
The additional burdens imposed by the new requirements may hamper the ability of those who have recently become unemployed or underemployed from supplementing their income with a home-based business. Hindering this type of business creation certainly won’t help the state’s economic problems.
The new regulations require all exemption forms to be notarized. While large corporations often have notaries on the payroll this is more than just a formality for businesses that qualify for this exemption.
Considering the additional time required for this process as opposed to being able to complete and submit the form online, forcing these small businesses to submit notarized forms can be quite costly. It can become even an even more significant expense for those who work regular full-time jobs and can’t get away during the day to have the form notarized or who live in remote areas.
The purpose of the exemption is to avoid burdening these small businesses unnecessarily. For some the total cost to claim the exemption under the new guidelines could be nearly as much as the license.
While the law allows the Secretary of State to implement regulations necessary to enforce the law, the new requirements may go beyond what the law allows. The law contains no requirement that a home-based business be located within the state of Nevada to receive the exemption. But the Secretary of State’s new regulations clearly require that they do.
This is just another case in which the government simply does not understand the burden that its regulations impose nor the consequences they create. At all times we should be encouraging new business creation and activity in the state. That is even more imperative with the troubles Nevada has suffered in the last few years. These actions of the Secretary of State’s office are an overreaction that will hamper the growth of business at a time it is sorely needed and that go beyond what the law allows.