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Will Nevada Tax Services?

  • Mar 7, 2013 | Gail Cole

 Nevada Considers Taxing Services. Yet to Be Determined: Which Services to Tax.

Nevada lawmakers are considering imposing a tax on certain services. Or rather, Nevada lawmakers are considering considering imposing a tax on certain services. Baby steps are required whenever a new tax is proposed. Few lawmakers care to be known as the person who created a new tax, no matter how legitimate a new tax may be.

State Concurrent Resolution 1 (SCR1), Requiring the Legislative Commission to conduct an interim study regarding the taxation of services, was introduced in the Nevada Senate on December 20, 2012, and has been referred to the Committee on Legislative Operations and Elections. The committee will study the issue and consider the impact taxing services would have on local governments and the state as a whole.

SCR1 begins with the following statements:

  • “…The economy of the State of Nevada and its local governments relies significantly on revenue derived from taxing the sale of goods; and
  • …The economic downturn that began in 2007, accompanied by changing economic patterns which have caused the sale of services to constitute a greater part of the economy, has reduced the revenue derived from taxing the sale of goods; and
  • …The creation of a sales tax on services could help to realign and stabilize the tax base in accordance with the actual economic activity taking place; 
  • …An interim study of the taxation of services could assist the Legislature in establishing a tax structure for this State and its local governments that would be more flexible, be more stable and provide adequate revenue.”

The measure directs the Legislative Commission “to conduct an interim study of the desirability, feasibility and necessity of imposing sales taxes on the provision of selected services.”

A new tax on services would not stuff state coffers; rather, it would help create revenue stability. Therefore, SCR1 specifies that the committee should “consider revenue neutrality.” This could be achieved by lowering the rate of sales tax imposed on goods.

Both Democratic and Republican lawmakers in Nevada seem willing to discuss the taxation of service. The Las Vegas Sun points out that “a services tax seems to have been getting the most traction with both parties.” That said, there are definite partisan trends. Republican lawmakers may argue for a more broad services tax; Democrats may suggest taxing fewer services -- notably those used mainly by businesses, such as accountants and custodians.

But is a tax on services regressive? Senate Majority Leader Mo Denis (D-Las Vegas) remarked, “That has to be one of the questions: How regressive is this?” According to the Las Vegas Sun, “Nevada already has one of the most regressive tax systems in the United States.” In other words, people with less money pay proportionately more in taxes than people with more money. Limiting the services tax to luxury services could make a service tax less regressive.

This issue is worth tracking, but Nevada won’t start taxing services any time soon. The Legislative Commission is tasked with establishing a committee and several subcommittees “as soon as practicable after July 1, 2013.” It will report the results of the study, along with any recommendations, to the 78th Session of the Nevada Legislature. That session won’t begin until 2015.

Nevada is not the only state to consider taxing services; the idea is also on tables in Louisiana, Minnesota, Ohio, and Virginia.

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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.