This Alert addresses recent developments in Nevada and Illinois state tax laws, including the commerce tax, live entertainment tax and passenger carrier tax in Nevada, as well as two administrative rulings issued by the Chicago Department of Finance related to remote uses of computers and the application of the amusement tax to electronically delivered amusements.
New Commerce Tax in Nevada
Effective July 1, 2015, Nevada has imposed a new commerce tax, which is a gross revenue tax on each business doing business in Nevada whose Nevada gross revenue in a fiscal year exceeds $4 million. Businesses with nexus with Nevada will have to determine what revenues relate to Nevada to determine if the $4 million threshold is met. Then they will have to use those gross revenues, less certain exemptions and exclusions, to calculate the base of the new tax. The tax rate varies based on North American Industry Classification (NAICS) industry code. The rate of tax ranges from a low of .051 percent for the Mining, Quarrying, and Oil and Gas Extraction category (NAICS 21) to a high of .331 percent for the Rail Transportation category (NAICS 482). Unclassified businesses have a rate of .128 percent. Notably, businesses subject to the commerce tax will be entitled to a credit toward their modified business tax (MBT) liability equal to 50 percent of their commerce tax liability beginning with the first quarter after the first payment of the commerce tax.
Miscellaneous New Nevada Taxes
Nevada also implemented a new live entertainment tax of 9 percent, changed the rate of the modified business tax on payroll to 1.475 percent for a general business and imposed a passenger carrier tax of 3 percent on fares of transportation network companies, common motor carriers and taxicabs.
Tax Updates for Chicago, Illinois
The Chicago Department of Finance has issued two new administrative rulings to be enforced as of September 1, 2015. The first, Chicago Personal Property Lease Transaction Tax Ruling #12, explains the scope of the Chicago lease tax to remote uses of computers. It explains that such non-possessory uses or leases of computers are subject to tax if the use occurs from a terminal in Chicago. This includes cloud computing as explained in the ruling. Thede minimis use of a computer exemption is also discussed, with examples provided. The second, Chicago Amusement Tax Ruling #5, explains the application of the amusement tax to electronically delivered amusements, as well as the sourcing of such sales and the taxation of bundled charges. However, the ruling does not address the nexus issue of out-of-city resellers of city amusements.