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Suggestions for Simplifying Nevada’s Sales Tax

  • Mar 5, 2015 | Gail Cole

 Live entertainment in Las Vegas.

The Tax Foundation has published a thorough investigation of Nevada’s taxes. It suggests Nevada fix “what is broken with the current tax system,” and examine in particular the elements that “exist only in Nevada.” This blog summarizes problems, as identified by the Tax Foundation, and its suggestions for sales tax and the Live Entertainment Tax.

Sales tax

The report calls Nevada’s sales tax structure “narrow, outdated, and complicated.” It is even more narrow now that it has been in the past: “Data indicates that since 1970, Nevada’s sales tax breadth—a measure of the broadness of the tax base—has gone from 73 percent to just 39 percent in 2012.” One reason for this is the shift of American spending habits: we now spend more on services than goods.

In addition, there is “tax pyramiding” in Nevada, which taxes many business inputs that should be exempt, such as supplies and equipment purchased by hotels and computer hardware purchased by businesses for use in a production.

Live Entertainment Tax

There are several problems with the Live Entertainment Tax (LET), according to the Tax Foundation. These are:

  • It is not neutral and therefore encourages consumers to change behavior.
  • It is “needlessly complex.”
  • “It is jointly administered by two departments at the state level, making administrative costs duplicative and higher than they need to be.”
  • The “definition of ‘live entertainment’ used by the state is complicated and arbitrary.”
  • It is “riddled with exemptions” and those exemptions “are difficult to track.”

Proposed solutions:

  • “Eliminate the current sales tax exemption for the service industry.” This can be done in different ways and to varying degrees.
  • “Lower the 6.85% state sales tax rate.”
  • “Exempt manufacturing machinery from the sales tax base.” It leads to double taxation.
  • Exempt business inputs from sales tax.
  • Repeal the LET and broaden sales tax “to all admissions charges and food, beverages and merchandise sold at all venues that charge admission.”

In essence, the state needs to simplify, stabilize, and modernize sales tax, “applying it evenly to all final retail transactions without special carve-outs.” See the Tax Foundation’s Simplifying Nevada’s Taxes: A Framework for the Future for additional information.

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photo credit: Justice Performs at Boulevard Pool at The Cosmopolitan of Las Vegas via photopin (license)

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.