Wednesday, October 01, 2003
Copyright © Las Vegas Review-Journal

TAXES: Companies brace for levies

Business-license tax is now out while modified business tax in

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A big increase in payroll taxes will hit Nevada businesses beginning today.

For casinos, the new payroll tax comes on top of an 8 percent gross gaming tax increase that took effect Aug. 1.

The new payroll tax will affect almost every Nevada business and is expected to bring in $320 million by June 30, 2005.

The new modified business tax replaces the business license tax, but it will cost most employers a lot more.

Instead of the business license tax's $25 per quarter fee, a levy that cost employers $100 per employee annually, the modified business tax will force employers to pay a 0.7 percent tax on their gross payroll after deducting for employer-paid health benefits.

The rate drops to 0.65 percent in July.

Tim Menifield, vice president of finance for Las Vegas-based Payroll Solutions, an employee-leasing company, said almost all of the small businesses that use his Cheyenne Avenue company should see substantial increases in fees to offset the new taxes.

"We're the employer of record, but we just calculate the effect of the (new tax rate) and pass it through," Menifield said.

A company will pay about $210 in modified business taxes on a single employee with a gross payroll cost of $30,000 per year after the employer deducts for health benefits.

Banks and other defined financial institutions will pay a 2 percent modified business tax on payroll, a rate that's almost three times more than other businesses will have to pay. The bank tax is expected to raise $37 million.

Banks will also be charged an additional $7,000 annual excise fee for each branch office above one that they have in Nevada beginning Jan. 1.

Menifield said the new taxes will require company accountants to correlate previously unrelated numbers, with payroll paid used as a base. Despite the changes that needed to be made to accounting software, Payroll Solutions will meet today's deadline.

"We don't have a choice," he said.

The extra work involved in implementing the payroll taxes isn't simply a matter of rearranging terms on computer spreadsheet software, MGM Mirage spokesman Alan Feldman said.

"It required a new formula," Feldman said. "This isn't straightforward, and we need to make sure we're collecting numbers the right way (to comply). There never previously was a nexus between benefits paid and taxes paid.

MGM Mirage employs about 36,000 Nevadans and paid a bit less than $6 million a year under the expiring business license tax.

Feldman anticipates the new modified business tax will cost MGM Mirage about $15 million annually, even after the offset for company-paid health benefits.

Station Casinos spokeswoman Lesley Pittman estimated the payroll tax will cost the locals giant an extra $800,000 annually.

The biggest hit for the big casino operators, however, is the extra half-point jump in taxes paid on the money won from gamblers. The gross gaming tax's top rate increases to 6.75 percent from 6.25 percent and is expected to raise about $100 million over two years.

Pittman said the company estimates that it will pay an extra $3.7 million annually because of the new tax.

Also taking effect today, is a quarter-cent sales and use tax increase that the Clark County Commission approved to fund transportation issues. The county sales tax increase, which raises the sales tax to 7.5 percent, is expected to bring in $2.7 billion.