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Knecht wants businesses to fight commerce tax

Matt McCarty, left, listens on Feb. 29 as State Controller Ron Knecht talks about the commerce tax and holds the state’s “Popular Annual Financial Report” that his office distributes in Elko.

ELKO – State Controller Ron Knecht is asking local businesses to help fight the state’s new commerce tax by getting registered voters to sign a referendum petition.

Matt McCarty said the Elko Area Chamber board has not endorsed the petition, but he thought it was important that local businesses got to hear what Knecht had to say on the commerce tax. McCarty said he is planning on speaking to the Chamber’s board about the issue.

Knecht gave a brief history lesson Monday on why Nevada businesses are facing a gross receipts tax this year.

He said his standard for writing a budget is “government in Nevada needs to grow slower than the economy.” Instead, the state ignored his advice and passed “the largest tax increase ever in Nevada history.”

Knecht said decades ago, half the states had gross receipts taxes, but there is a consensus among policy experts and academics that this type of tax is “economically destructive.”

“Today there are only three states that still have them and they’re retreating from them,” he said.

Despite 79 percent of Nevadans voting against the margins tax – another version of a gross receipts tax — two years ago, the Legislature decided to pass the increase. Knecht said they put in the commerce tax at “the last minute.”

“Previously gross receipts tax proposals would have hit all businesses with the same rate,” he said. “This time they devised 26 different rates for 26 different industries and business categories.”

He said the threshold for when a business pays the commerce tax is $4 million. However, there isn’t anything in the law that forces the state to keep to that threshold. Knecht said many lawmakers want to lower the threshold. Assemblyman John Ellison – who voted against the commerce tax – said he has heard from other legislators that they want to lower the threshold to $500,000.

Knecht said another “really bad” problem with the commerce tax is the filing.

“Every business will have to file, regardless of whether you owe a cent,” he said.

He said the filing won’t be as simple as copying IRS documents over to the state. The commerce tax will be filed according to the state’s fiscal year, which is July to June. Since most businesses don’t keep records from July to June, they will have to have another set of records, which will make it costlier for businesses.

“The new reporting is like five times worse than the IRS, mostly for small businesses,” Ellison said.

Knecht said if a person owns multiple businesses they will be taxed as a group, even if they are organized separately. He gave an example that if one person or group owns at least 50 percent of three businesses and each of those made $2 million in gross receipts, that owner would be taxed on the joint $6 million in gross receipts.

Unlike the earlier margins tax, there are no exemptions for the commerce tax, Knecht said.

Knecht said he wants to get the referendum on the ballot for two reasons.

If people vote to repeal the commerce tax it goes away. If people vote to ratify the law, it means the Legislature can’t touch the threshold or play with the rates without the OK of the people.

“If we lose, we still win,” he said.

Knecht said if people want this referendum on the ballot they need to get petitions signed. Anyone who wants to collect signatures must have all 26 pages of the petition for it to be legal. The petitions must be notarized and then filed in each county, so Elko County registered voters must sign an Elko County petition. However, people in Elko County can help distribute petitions for other counties.

Knecht said they need to collect 55,234 signatures of registered voters, but he and volunteers are aiming for 80,000 signatures or 20,000 per congressional district.

The deadline for turning in the completed petitions is June 21, but Knecht is aiming for June 15.

Locally Debbie Pawelek, owner of Natural Nutrition at 1900 Idaho St., is leading the cause in Elko County. She said her business has collected about 800 signatures so far.

“I picture it like, what if 55 stores got a thousand signatures? We’d have it,” Pawelek said. “We’re almost at a thousand, but we’re passionate.”

Knecht said he thinks they have about 10,000 signatures statewide. He said he is still working out the logistics on making sure each county has a location leading the charge.

Anyone who wants to help collect signatures can download the petition from www.ripcommercetax.com. Knecht said those who collect signatures must print out all 26 pages for it to be legal and all the pages should be kept together.

“Just tell people the signatures start at page 22,” he said.

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