Each state, city, and municipality has the ability to impose their own business taxes to help fund local initiatives and programs.
The Nevada Modified Business Tax (MBT) is a state tax for Nevada businesses. Here’s what business owners should know about who is affected, compliance requirements, how the tax is utilized, and what Mosey can do to help.
What Is Nevada Modified Business Tax?
The Nevada Modified Business Tax (MBT) is a payroll tax for most businesses operating within the state of Nevada. Its primary purpose is to fund the state’s Unemployment Insurance Trust Fund, which provides benefits to newly unemployed job seekers.
The MBT is based on the total wages paid by employers to their employees, including cash wages, tips, bonuses, commissions, and other compensation.
Who Is Affected By Nevada Modified Business Tax?
Businesses that meet certain criteria are required to pay the Nevada MBT. Generally, if your business has employees and pays wages subject to federal unemployment tax (FUTA), you are likely subject to the Modified Business Tax.
The Nevada Modified Business Tax applies to both for-profit and nonprofit entities operating in Nevada, including corporations, partnerships, and limited liability companies (LLCs). Even sole proprietors can be subject to the MBT if they hire employees, although sole proprietors employing people is a rare situation.
How Does Nevada Modified Business Tax Compliance Work?
Nevada Modified Business Tax compliance is a layered process. Most tax compliance concerns involve careful calculation and compliance with rates that can change based on thresholds. It’s important to double-check as much as necessary and refresh yourself on the guidelines each year, as they may change annually.
Registration With NDT
Businesses must register with the Nevada Department of Taxation (NDT) to receive a Nevada Business Identification Number (NVBIN). Registering online is simple through NDT’s website. If your business is already established, you’ve completed this step.
Mosey automates this registration — it’s included with unemployment insurance (UI) registration, but is processed by the state after the UI registration is completed, so keep in mind that it may take a few weeks to receive the account number.
Calculating Tax Liability
The MBT is calculated based on the total wages paid to employees during each quarter. Tax rates and thresholds may vary, so it’s important to consult the latest guidelines provided by the NDT.
Filing Requirements
Employers are required to file quarterly reports and remit the MBT to the NDT. Quarterly reports must include details of total wages paid (including things like tips, bonuses, and commissions) and any deductions or exemptions claimed.
Due Dates
MBT payments are due quarterly, typically by the last day of the month following the end of each quarter (April 30th, July 31st, October 31st, and January 31st for the preceding quarter).
Recordkeeping
Businesses must maintain accurate records of wages paid, tax calculations, and any correspondence with the NDT.
Overall, Nevada Modified Business Tax compliance isn’t significantly different from many of the quarterly tax tasks you’re already required to complete. It simply adds one more consideration, deduction, and payment to remit each quarter. It’s easy to streamline MBT compliance into your quarterly tax process.
Nevada Modified Business Tax Guide
If this is your first quarter in business, here’s a step-by-step walkthrough of the Nevada MBT process and what you need to know to complete it correctly.
The Registration Process
Nevada businesses are required to register with the Nevada Department of Taxation (NDT) before they can begin operating. This is also the first step of MBT compliance. Registration can be completed online through the NDT’s website.
You’ll be asked to provide basic information about your business, such as its legal name, address, federal employer identification number (FEIN), and details about the business structure (e.g., corporation, LLC, partnership).
Once you’ve registered, you’ll receive a Nevada Business Identification Number (NVBIN), which is used for tax reporting purposes and communication with the NDT. Keep your NVBIN number safe — you’ll need to refer to it frequently.
Calculating MBT Liability
Your MBT is calculated based on taxable wages paid by your business to employees during each calendar quarter. Taxable wages include all forms of compensation subject to federal unemployment tax (FUTA), such as salaries, wages, bonuses, commissions, tips, and other forms of compensation.
As of 2024, the MBT tax rates and wage thresholds are as follows:
- Tax Rates: The standard tax rate for most businesses is 1.475% of taxable wages.
- Wage Threshold: Employers are subject to MBT if their total quarterly wages exceed $50,000.
Rates can change every year. It’s important to refer to the most up-to-date information available on the NDT website for accurate rates.
Filing and Payment
Businesses must file quarterly MBT returns and remit payment to the NDT by the specified due dates. The quarterly reporting periods and due dates are as follows:
- First Quarter (January - March): Due by April 30th
- Second Quarter (April - June): Due by July 31st
- Third Quarter (July - September): Due by October 31st
- Fourth Quarter (October - December): Due by January 31st of the following year
Quarterly reports must detail the total wages paid to employees during the quarter, calculate the MBT liability based on the applicable tax rate, and include any deductions or exemptions claimed.
Payments can be made electronically through the NDT’s online portal or by mail with a check or money order. Electronic payment can help you avoid mishaps that can negatively impact your compliance. If you’re very close to the due date, it’s best to make your payment electronically to avoid a payment getting lost or hung up in the mail.
Recordkeeping
To ensure compliance with MBT requirements, businesses should maintain accurate records of all wage payments, tax calculations, quarterly reports, and correspondence with the NDT.
These records should be retained for at least four years. Once they are officially older than four years, you can securely destroy them.
Note that the four-year storage requirement applies to all tax documents for Nevada businesses, not just NDT records. This differs from the IRS requirement for storing records for three years. It’s best to ensure your recordkeeping system is compliant for all documents.
What Are the Penalties for Nevada MBT Non-Compliance?
Failure to comply with Nevada MBT requirements may result in penalties and interest charges imposed by the NDT. Penalties may include fines for late filing, late payment, or underpayment of MBT liabilities.
It’s important to stay on top of your business tax obligations, meet filing deadlines, and accurately report your financial information to avoid penalties.
Nevada MBT Compliance FAQs
State and local taxes often have different rules, exceptions, caps, and requirements. Some unique situations may arise with Nevada MBT compliance. Here’s what you should know when calculating gross wages and making deductions in preparation for your quarterly MBT payment.
What Can Be Deducted From Gross Wages?
Any qualified health, vision, or dental insurance premium paid by the employer can be deducted from gross wages. This excludes premiums repaid to employers by employees. Self-insured businesses can also deduct insurance costs and direct administrative costs from gross wages.
Insurance costs for employee dependents (like spouses and minor children) count as a deduction for the employer-paid portion of the insurance plan that covers an employee’s dependents.
What if the Amount Paid in Premiums and Claims Exceeds Gross Wages?
It’s rare that claims and premiums will exceed gross wages, but employers sometimes encounter unusual circumstances where insurance costs and claims are unexpectedly or suddenly high following an incident.
If you pay more in premiums and claims than you do in wages for a quarter, the excess amount can be carried over and deducted from the following quarter.
What Is the Gross Wage Cap?
Some payroll taxes have a gross wage cap, which means that taxes only need to be paid up to a certain gross wage threshold. The Nevada Modified Business Tax does not have a gross wage cap.
Can Nevada Modified Business Tax Be Deducted From Employee Wages?
It is against the law to deduct Nevada MBT from employee wages. Employees are not responsible for making MBT contributions. MBT taxes fund unemployment benefits, and quarterly payments are exclusively the employer’s responsibility.
Do You Have To Contribute to Both MBT and Unemployment?
Employers are required to contribute to MBT takes and make quarterly unemployment contributions. Although the funds are theoretically directed to the same institution, the Nevada government utilizes MBT funds and unemployment contributions differently. Employers must pay both.
Do You Need Assistance With Compliance?
Mosey’s compliance automation tools are designed to simplify compliance management by tracking state and local compliance requirements. Our compliance platform automates the process of meeting compliance requirements by directing you to the resources you need to complete core tasks and sending you reminders.
Schedule a demo with Mosey to learn how compliance automation can simplify your business.
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