Panel removes gross receipts tax from bill

Erin Neff

Friday, April 18, 2003 | 11:24 a.m.

CARSON CITY -- A Senate panel's vote Thursday to remove the gross receipts tax on business from the governor's $1 billion revenue plan won't likely spell death for the proposal.

Gov. Kenny Guinn's staff dubbed a 6-1 vote by the Senate Taxation Committee "just noise." Those who dislike the plan viewed it as a victory. The plan would impose a one quarter of 1 percent tax on business receipts over $450,000.

Sen. Ann O'Connell, R-Las Vegas, who interrupted discussion on a liquor tax to call for a vote on gross receipts, said she saw the vote as a call to study other options.

"We have to have a voice and that's why I brought it for a vote," O'Connell said after the hearing. "There is still staunch opposition to that tax."

But proponents of the proposals that include a gross receipts tax say there's still plenty of time.

The gross receipts tax is a major part of Guinn's tax increase proposal in Senate Bill 238. Backers of the plan note the bill could be amended on the Senate floor to include the gross receipts tax.

The Assembly version of the tax plan, Assembly Bill 281, reflects the Task Force on Tax Policy proposal and still includes the gross receipts tax. Both the Senate and Assembly measures have been ruled exempt from the usual deadlines. Any differences between the versions will be worked out in a joint committee.

Immediately after the Senate panel's vote, Guinn's deputy chief of staff, Michael Hillerby, labeled the move "just noise." He said the gross receipts tax is "still a good broad-based business tax" that he believes will ultimately be considered by the full Legislature.

Nevada Resort Association lobbyist Greg Ferraro characterized the Senate panel vote as "simply one step in a very long process."

"By the time we reach June 2, gross receipts will be a very important part of any tax proposal," Ferraro said, referring to the last day of the session.

O'Connell brought the motion to remove the gross receipts tax from Guinn's proposal during a work session designed to discuss only the cigarette, liquor and business licenses taxes within the plan.

"We have a lot of people hanging on the (question) of, 'Are we going to have a gross receipts or not?' " O'Connell said.

O'Connell's sudden motion to remove the tax was seconded by Sen. Randolph Townsend, R-Reno.

Democrat Bob Coffin of Las Vegas was the lone voice and vote to keep discussion of the tax alive.

"I'm not sure we really tried to make it work," Coffin said, referring to other ways the gross receipts tax can be amended to exempt other businesses.

The tax, as proposed, would already exempt 62 percent of Nevada businesses. "I just wonder if this motion isn't a little hasty," Coffin said.

O'Connell and Townsend were joined by Chairman Mike McGinness, R-Fallon; Dean Rhoads, R-Tuscarora; Sandra Tiffany, R-Henderson; and Joe Neal, D-North Las Vegas; in voting to remove the tax from SB238.

Backers of Guinn's plan note the proposal would take out a major piece of the governor's plan. The gross receipts tax would raise an estimated $229 million by 2006 -- the first year Guinn envisions its implementation.

Noting the same committee's decision earlier in the work session to phase in a 35-cent cigarette tax hike instead of the governor's 70-cent proposal, Hillerby warned that the governor's budget might not be funded.

"They've got real problems in (years) '04 and '05 if they don't replace that revenue," Hillerby said.

Tax opponents say the Senate committee's vote on the gross receipts tax will open up the door to other options.

Sam McMullen, the lobbyist representing the Business Representatives Group, which has proposed a sales tax on services, said the panel's vote opens the door for consideration of his group's proposal.

"It opens up the dialogue so they can consider some of the other things," McMullen said. "We're looking forward to the debate now."

The business group proposal creates a 5 percent sales tax on services, with numerous exemptions, at the same time it reduces the sales tax on goods from 7.25 to 5 percent.

Sens. Mark Amodei, R-Carson City, and Terry Care, D-Las Vegas, have proposed a 3 percent sales tax on services, exempting the first $50 and several services including advertising, child care and health care.

Amodei welcomed the Senate panel's actions Thursday because it incorporated several of the ideas contained within Care-Amodei, including phasing in the cigarette tax increase and doubling the liquor tax -- an increase that is slightly higher than the liquor tax hike proposed by Guinn.

"I'm glad that the committee felt like they were in a position to start moving," Amodei said. "Who knows where the direction will end up."

Assembly Speaker Richard Perkins, D-Henderson, said he was disappointed in the Senate panel's action because it came without a real hearing on the tax from the Task Force on Tax Policy which proposed it to Guinn.

"I'm disappointed at the action because as far as I know, the gross receipts tax is the only broad-based business tax that's on the table in bill form," Perkins said.

Perkins has consistently said that any tax package that leaves the Assembly must contain a broad-based business tax.

"A sales tax on services is not a broad-based business tax," he said. "It's a tax on my constituents."

Assembly Taxation Committee Chairman David Parks, D-Las Vegas, said the gross receipts tax is still alive in his committee, although it will likely be amended from its current form to appease concerns some lawmakers have about the proposal.

"They're certainly going to want more information before taking a vote," Parks said.

Some committee members and other Assembly members have asked him whether the tax can be adjusted. Guinn's proposal exempts the first $450,000 of a business's receipts. A similar proposal by the Nevada Task Force on Tax Policy exempts the first $350,000 of receipts.

"There's flexibility toward the threshold exemption, be it $450,000 or $500,000," Parks said.

He also said adjustments are possible to exempt particular low-margin industries that have complained the tax adversely hurts them by ignoring a business' profitability. Parks also said his committee will hold a hearing next Thursday on the various proposals for a sales tax on services.

In other developments in the Senate Taxation Committee on Thursday, a proposed tax on the gross revenue of satellite television companies died for the lack of a second to Rhoads' motion.

The panel unanimously voted to double taxes on the four types of alcoholic beverages classified by the state's Taxation Department. The tax increase would raise $20.2 million in 2004 and $20.7 million in 2005.

Guinn and the task force had each proposed an 89 percent increase in the same taxes, raising $18 million in 2004 and $18.4 million in 2005.

The panel's vote on the cigarette tax hike, phased in over two years, was also unanimous.

One tax the committee on which the committee did not reach a decision was the business license tax.

Guinn has proposed increasing the application fee for a business license from $25 to $100 annually. The tax is currently paid only when a business first gets its license. The governor also intends to include sole proprietors who are currently exempt from the tax.

That concerned Tiffany, who said any motion the committee makes on a business license tax must keep the sole proprietors exempt. She also questioned whether the 60,000 sole proprietors Taxation Department Administrator Chuck Chinook identified was the correct number.

Tiffany said she thought there were closer to 95,000 such businesses. Chinook said his number only reflects those which file Internal Revenue Service taxes as businesses. The others, he said, probably listed their incomes as personal, and not business.

"I still think you have the number wrong," Tiffany said.

"There are so many sole proprietors and they should be exempt. It would be real estate agents, hairdressers, me," she added, referring to her own sole proprietorship.

Coffin argued against exempting sole proprietors from the increase because he said: "You create more unpopularity when you start playing favorites."

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