A Guide to Nevada’s Modified Business Tax

Certain taxes could still apply to your startup, depending on its nature and revenue. One excellent example is the Nevada Modified Business Tax (MBT). The MBT is a complex tax system that’s constantly changing. It can be challenging to understand, especially if you don’t know where to start. 

If you need help figuring out how it works, you’ve come to the right place. In this blog, we’ll explore the NV modified business tax and how it can affect your startup’s finances. 

What is The Nevada Modified Business Tax?

The MBT is a payroll tax in Nevada that’s applicable to all businesses subject to the Nevada Unemployment Compensation Law. Its rates are calculated based on the gross wages and reported tips paid by the businesses for a calendar quarter minus their employee healthcare expenses. 

Moreover, there are two classifications for the NV modified business tax: General Business and Financial Institutions and Mining. 

General Business (NRS 363B)

General businesses have an excise tax rate of 1.475% on their wages after healthcare deductions. However, this does not apply to the first $50,000 of their gross wages.

Here’s how it works: if your total wages for the first quarter of the year is $101,000, you’ll only be taxed for the remaining $51,000. The total of your MBT for that quarter will be $889.95.

It’s also worth noting that employers under this category can enjoy tax credits of up to 50% of the amount they paid during the previous year. They can use their tax credits to pay for their existing tax dues.

What happens if your taxable wages for the quarter are below $50,000? You still need to file your tax returns even if your tax due is technically zero.

Financial Institutions And Mining (NRS 363A)

The excise tax rates for financial institutions and mining companies are higher than that of general businesses. Though their tax rate is 2%, they get the same tax credit opportunity as general businesses. 

Moreover, they don’t have the same $50,000 exemption as the first classification. This means they must pay taxes on all wages even if they earn less than $50,000 that quarter.  

How Does The Department of Taxation Determine Your MBT Classification?

Nevada’s Modified Business Tax is a self-reporting payroll tax. It’s up to you, the employer, to characterize your business as a financial institution or a general business. 

However, the Department of Taxation primarily looks at what your business is licensed or registered for. If your startup is registered as a savings and holding company, you’ll be categorized as a financial institution. 

Can you dispute your classification? Yes, but the process for these cases takes time. If you want to change your assigned classification, you must write a petition to the department. 

Your petition should include the following:

• Your business description
• Grounds for challenging the classification
• Other documents supporting your claim, such as financial records

Limitations of The NV Modified Business Tax

The MBT has a few exemptions, just like any other tax form. The following entities are exempt from NV’s modified business tax;

• Native American Tribes
• Nonprofit organizations 
• Political subdivisions
• Employers with household employees only

If these conditions apply to your business, you’ll be exempted from paying the MBT.

Filing Instructions For Nevada’s Modified Business Tax

Here’s what you need to do to file your MBT tax returns:

If you’re a general business employer, you must complete a TID NO:020-TX Form and submit them at the end of the month following the last day of the quarter. For instance, all forms and tax payments for the first quarter of 2023 should be submitted by April 30, 2023. 

Per the Department of Taxation, you can’t include healthcare deductions like life and occupational disease insurance in your TID NO:020-TX Form. 

On the other hand, if you’re a financial institution or a mining company, you need to report all your paid wages to a TID NO:021-TX Form. The same rule for healthcare deductions to this classification. 

You can find both TID NO:020-TX and TID NO:021-TX forms on the Nevada Department of Taxation website. 

Late Submissions

If an employer misses the submission deadline, they’ll be fined as high as 10% of their unpaid balance. There will also be an added .75% interest for each month they don’t pay their tax dues. 

Conclusion

If you want to start a business in Nevada, you must understand its modified business tax. The MBT may be complicated, but NCH is here to provide the guidance you need to file them properly. 

NCHS offers comprehensive tax services for businesses of all sizes. From tax preparation to compliance, our tax professionals can lessen the burden that modified business taxes poses to your business. 

All businesses have unique needs and goals, so we’ve made it our mission to implement a personalized approach to our services. Our team will work closely with you to develop solutions for your unique tax situation. 

By working with us, you can rest easy knowing that your startup’s taxes are in capable hands. Find out more about our strategic tax services by visiting our website here. 

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.