Nevada business tax amnesty endorsed

Tuesday, Aug. 7, 2001 | 11:20 a.m.

Nevada business taxes

Though Nevada has no income tax, businesses in the state are responsible for paying two major taxes: the business tax and the sales/use tax.

RENO -- Members of the Nevada Tax Commission on Monday endorsed an amnesty program to give breaks to businesses that have not paid their sales and use tax or their business tax.

There could be thousands of businesses in fast-growing Nevada that have never registered with the state Taxation Department or never knew about their tax obligations, commissioners said. Details of the program will be worked out over the next few months. But companies could be forgiven the interest and penalty on back taxes. And though unlikely, they could be absolved of paying their past taxes.

At the same time the commission, at the prodding of State Controller Kathy Augustine, agreed to move forward toward collections of up to $50 million from delinquent businesses.

The two-pronged effort comes at a time when the state is facing uncertain financial times. And revenues are not expected to grow at a fast clip as they did in the past.

Carole Vilardo, executive director of the Nevada Taxpayers Association, said the fastest way for the state to get money is through the amnesty program.

Tax Department Director David Pursell said an amnesty program in 1993 on payment of only the use tax yielded $2.5 million in back revenue. At that time newspaper accounts showed that more than 1,800 companies took advantage of the program and escaped paying penalties and interests.

Vilardo said there are "lots of businesses" that come to Nevada from other states and in some areas may not have to get a business license. They don't know the law about collecting the sales or use tax or paying the business tax. She suggested the penalty and interest be waived on these back taxes.

"It's important to have people registered and paying taxes," she said.

The department will draft a regulation and hold workshops to get comments from the public on the details. For instance, one thing to be decided is how far back a business must go in paying its tax and whether there should be a cutoff period.

Vilardo said she would like to seek the amnesty period last for six months, during which businesses could enter the program. The earliest it could begin is in November because of the hearings and regulations to be adopted.

She said trade groups would push this amnesty to get businesses to sign up with the state and start paying their taxes.

On the second issue, Pursell said he would "start the wheels in motion" to hire a debt collection firm to track down those who have skipped out on their payments.

The commission was presented with figures that show there is $101.2 million owed in back taxes, penalties and interest. Pursell indicated that the best chance to collect that money comes in debt owed for three years.

A good part of the $101.2 million -- $44.3 million -- has already been written off by the tax commission; $6.7 million is involved in bankruptcies and may not be collected and $732,605 is in payment plans that are delinquent.

Augustine said she has been to three prior meetings of the tax commission to push it to join her office in the use of private debt collection companies to chase down the deadbeats.

The tax commission delayed a decision on whether to side with Augustine or hire its own company to pursue the bad debts.

Augustine wants to publish the names of the delinquent companies on the Internet, just as the state Welfare Division does for "Deadbeat Dads" who don't pay child support. She would have to get a waiver from Gov. Kenny Guinn to do away with the confidentiality of these tax records. But she said Guinn considers these people "non-taxpayers."

Pursell estimated there would only be about $9.8 million collectible from the sales and use tax. He assumed the recovery rate would be up to 25 percent. And after the collection agencies take their share, the state would end up with anywhere from $265,003 to $444,475. He told the commission that 71 percent of the sales tax goes to local governments and school districts and only 29 percent goes to the state. The $265,003 to $444,475 is a lot less than what Augustine estimates. She told the commission that Pursell's figures are too low and don't take into account other surcharges that would be added on to the debt.

Augustine said she has had two private firms on contract since April to start running down the deadbeat taxpayers. The biggest debt is owed the taxation department and she wants the debt collectors to collect those taxes, but the tax agency has not signed off on that plan, she said.

"We're now in a budget shortfall and it's critical to start collecting the money," she said.

Augustine's office has been working with other agencies to collect money owed. For instance, it is going after $500,000 owed by a mine to the state Division of Environmental Protection.

She has hired Prime Recovery, Inc., of Chicago to go after those who owe the state more than $25,000. That company will get 50 percent of whatever it collects. The state also has a contract with OSI of Sacramento to pursue those who owe less than $25,000. It receives 11.75 percent of what is collected.

Officials explained Prime Recovery must go through exhaustive and detailed examination of the books of big companies to find out how much is owed. That's why it gets the 50 percent. There is less investigation required of OSI to collect the smaller accounts.

Pursell told the commission "whichever way we go, we have to get going," to start tracking down the delinquent taxpayers.