Bill would tie Nevada commerce tax threshold to inflation; supporters say it protects small businesses

The Assembly Committee on Revenue heard Assembly Bill 276, which would replace the fixed $4,000,000 threshold for Nevada's commerce tax with an annually adjusted exemption tied to the Consumer Price Index for All Urban Consumers, Western Region.

"The bill seeks to adjust the gross revenue threshold above which businesses are subject to the commerce tax, ensuring that the threshold is indexed to inflation," said Assemblyman P.K. O'Neil, sponsor of AB 276. O'Neil said the change is intended to protect small businesses and make the tax more equitable as prices rise.

Assemblywoman Jill Dickman, a co-presenter, said she opposed the original commerce tax in 2015 because she feared it would capture small businesses. "Unfortunately, inflation has caused many small businesses to now fall under the commerce tax threshold," Dickman said, and she called AB 276 a "responsive mechanism to adjust the commerce tax threshold in line with economic indicators."

Under the bill as presented, the exemption would be recalculated annually using the three-year average percentage change in the Western Region CPI. Section 4 of the bill, and a sponsor amendment presented to the committee, would round each annual calculation to the nearest $100,000, require the Department of Taxation to publish the initial fiscal-year 2026 calculation on its website within 30 days of the bill's effective date, and require publication for fiscal year 2027 and later by March 1 each year. The sponsor also proposed amending statute (referred to in testimony as "NRS 363 c dot 6 2 0") to specify that the Department would not pay interest on overpayments caused by a taxpayer using an incorrect exemption threshold on its return.

Michael Nakamoto of the fiscal analysis division provided data from the Department of Taxation for FY 2024: "There were 8,226 taxpayers for the commerce tax that paid approximately $341,100,000 during FY '24," he said. Using a three-year average inflation example of 5 percent, Nakamoto said the exemption would increase from $4,000,000 to $4,200,000; he said the number of taxpayers who would file would decrease from 8,226 to 8,045 and described that change as "a net reduction of 145 taxpayers." He also testified the net revenue reduction based on FY 2024 data under that example would have been just under $1,600,000.

Committee members pressed for context about which businesses the change would affect. Nakamoto and the sponsors said the commerce tax applies to a range of businesses, including trucking, mining, gaming and manufacturing, and that the tax is a gross-receipts tax rather than a tax on net profit. "This is a gross receipts tax. This is not on their net profits," Dickman said.

A wide range of business groups testified in support, including the Nevada Trucking Association, the Nevada Franchise Auto Dealers Association, the Vegas Chamber, NFIB Nevada, the Nevada Manufacturing Association, the Carson City Chamber of Commerce and the Nevada Taxpayers Association. Testimony in support emphasized the 2015 origin of the $4,000,000 threshold (Senate Bill 483) and argued that inflation has eroded the threshold's real value.

American for Prosperity's deputy state director testified in a neutral/critical capacity and urged elimination of the commerce tax rather than indexing it, arguing the tax increases costs throughout the supply chain and can be distortionary. Several other witnesses described the bill as a modest, common-sense adjustment that would preserve the original policy intent of insulating smaller businesses from the commerce tax.

The committee recessed and later resumed to complete testimony from Las Vegas and remote callers. Sponsors said they do not expect the measure to decrease the threshold in times of deflation under the current draft; fiscal staff told members the state has not experienced sustained multi-year deflation recently and that allowing decreases would be a separate policy choice for the Legislature.

The hearing closed without a recorded committee vote. Any floor action, amendments adopted in committee, or further fiscal notes were not recorded in the hearing transcript.