Tax amnesty underway in Nevada

A special one-time tax amnesty program is underway in Nevada. Qualifying businesses and individual taxpayers with current tax liability are invited to apply for amnesty with the Nevada Department of Taxation through May 1, 2021. The department will waive monetary penalties and interest on outstanding taxes for eligible applicants who pay all unpaid assessments, fees, and taxes for the amnesty period.

The tax amnesty program applies to:

• Taxes, fees, or assessments due on or before March 31, 2020 (including monthly tax returns due on or before May 31, 2020)
• Quarterly tax returns due on or before April 30, 2020
• Outstanding tax debts for periods ending on or before May 31, 2020, that are due on or before June 30, 2020
• Many Nevada business taxes, including:
  • Cannabis tax
  • Cigarette tax and other tobacco products tax
  • Liquor tax
  • Sales and use tax

The outstanding tax debt must be paid in full during the amnesty period, which began February 1, 2021, and ends May 1, 2021.

Lodging tax and real property transfer tax are among those not eligible for tax amnesty, and the program is not open to businesses or individuals who:

• Are in bankruptcy
• Are unable to pay the outstanding tax in full
• Have entered into a compromise or settlement agreement with the Department of Taxation or Nevada Tax Commission regarding the unpaid tax or assessment

Applications and additional information is available from the Department of Taxation.

Tax amnesty programs can benefit states as much as taxpayers. For this reason, although they’re usually billed as “one-time” affairs, some states offer them relatively frequently. Nevada last provided tax amnesty in 2010.

By encouraging taxpayers to voluntarily pay the taxes they owe, tax amnesty programs boost tax collections with minimal cost to the state. Taxpayers get a break on penalties and interest, and the state can forgo many audits. It’s a win-win.

Amnesty programs do increase collections. Louisiana’s 2013 tax amnesty program brought in a staggering $435 million; New York’s 1985–86 tax amnesty program generated $401.3 million; and New Jersey’s 1996 amnesty brought in $350 million. They may also increase future voluntary compliance.

Nevada could use the money. In fiscal year 2020–2021, the state has a General Fund shortfall of approximately $1.2 billion.

Tax amnesty programs are essentially a quid pro quo: In exchange for paying outstanding taxes, taxpayers receive a waiver of some or all penalties and interest due.

Some tax amnesty programs are narrower than others. For example, an amnesty program could forgive criminal penalties but require full payment of civil penalties and interest. Or it could waive all penalties but only a portion of the interest. Some programs permit taxpayers to pay the taxes due in installments, while others require payment in full by the program’s end.

Amnesty programs may apply to some or all taxes and fees. In 1993, Nevada conducted an amnesty for the use tax on personal property brought into the state from other jurisdictions — and only that. Yet the 2010 Nevada tax amnesty program applied to 13 taxes or fees, including the state’s bank branch excise tax, liquor tax, modified business tax, and sales and use tax.

Both tax amnesty programs and voluntary disclosure agreements (VDAs) encourage businesses with outstanding tax obligations to identify themselves and pay the taxes due, in exchange for reduced or waived financial penalties.

But whereas tax amnesty programs are for registered taxpayers, a VDA is generally only for entities not registered to do business with the state, or not registered for a required tax. For example, an out-of-state seller that unwittingly established economic nexus with the state, or a business registered for sales tax but not business and occupation (B&O) tax.

Nevada has a VDA in addition to the limited tax amnesty program. According to the Nevada Department of Taxation, “If a taxpayer is registered for one tax type and voluntarily discloses another tax type, they can qualify for waiver of the penalty and interest pertaining to the newly disclosed tax only.”

Avalara’s free sales tax risk assessment can help you determine where your sales may have triggeredan obligation to collect sales tax.