CPAs: Drop gross receipts tax

The governor's gross receipts tax proposal was dealt another blow last week, this time from the state's accountants.

The Nevada Society of CPAs last week delivered to Gov.

Kenny Guinn its analysis of his plan to raise taxes.

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n its report, the group said that while it applauded the governor's efforts to find ways to raise new revenue, and endorsed many of his ideas, it could not support the so-called state activity tax.

"A gross receipts tax should not be instituted in Nevada because our analysis finds that the cons significantly exceed the pros," the report said.

The study said a gross receipts tax was broad-based, but then listed 10 reasons against it, including complexity, new infrastructure costs and the history of states that have implemented such a tax.

The report also said it's a regressive tax, meaning that it taxes those least able to pay, such as companies operating at a loss.

The group also claims it would result in products being taxed multiple times called pyramiding as they are sold from wholesaler to retailer to end user.

And several industries, such as mining and insurance, which already pay a form of business tax, would be taxed twice, according to the CPAs.

Instead, to raise an equal amount of revenue the group proposes creating a "split roll" property tax system in which businesses pay a higher rate.

"We would be able to raise the same revenue and it wouldn't require a new tax, with new regulations and the amount of litigation associated with a gross receipts tax," said Mike Bosma, senior manager with Grant Thornton and a representative of the CPA society.

"It doesn't make sense to put a new tax in place without first looking at existing taxes."

But a change in the property tax would require amending Nevada's constitution because it says all taxpayers must be treated alike.

Such a change would take up to five years, at least one reason several other tax ideas, including a corporate income tax and state lottery, have been rejected.

The group remained neutral on the proposed 7.3 percent admissions and amusement tax on non-participatory entertainment such as movies.

That tax, though, has received plenty of scorn from the joint Senate and Assembly Taxation Committees of the Nevada Legislature, whose members have criticized it for not taxing things such as golf club memberships that only the wealthy can afford.

On the other hand, the CPA group came out in support of much of the rest of the governor's plan, with a few modifications.

For example, it supports raising the Secretary of State fees, but said the initial and annual filing fees should not be included in that increase.

Instead, it suggested removing the cap on fees paid by larger corporations while undercutting the cost structure used by Delaware.

(Many large corporations incorporate in the state of Delaware to avoid certain costs.) The CPAs also said they could endorse an increase in the business license tax, but only to the $140 annual fee per employee proposed by the Governor's Task Force on Tax Policy and not the $300 annual fee put forth by the governor.

(The governor's plan calls for a temporary $300 tax to be reduced to $140 when the gross receipts tax is scheduled to take effect in several years.) "The increases should not be implemented by the State of Nevada as proposed due to the extremely heavy burden this proposal will place on Nevada's employers and the uncertainty of its temporary nature," read the report.

The society of certified public accountants supported without caveat an increase in liquor, cigarette and slot license fees on restricted licenses as well as passive ways to generate revenues by streamlining operations.

And it supported the increase in property taxes, whether or not a "split roll" approach is taken.

Despite the rejection of the gross receipts tax, Gov.Guinn was pleased with the report, according to Greg Bortolin, the governor's press secretary.

"He doesn't expect everyone to endorse his plan carte blanche," said Bortolin.

"He's identified the funding problem and what needs to be fixed and his suggestions.

He's very receptive to their thoughts.

At this point, everything's on the table."

Why CPAs don't like the gross receipts tax

* Discriminates against intrastate business versus interstate business

* Pyramiding or the multiple taxation of a product as it wends through the supply chain

* Regressivity since companies operating at a loss still pay

* Double taxation of certain industries

* New infrastructure costs for state tax system

* Information-sharing agreements may be required between Nevada tax department and IRS

* Litigation resulting from complexity of tax

* Manipulation of business' structures to reduce payment

* State's tax haven status lost

* History of problems experienced by Indiana, West Virginia, and Washington Source: Nevada Tax Proposal Study