State fails to collect million in business license fees

Since 1992, companies doing business in Nevada have been required to pay a one-time $25 licensing fee.

But the Reno Gazette-Journal on Thursday reported an estimated $3 million has not been collected because information is not shared between two key state offices.

The newspaper compared total license fees collected by the state Department of Taxation with the total for-profit incorporation filings at the Nevada Secretary of State's office. The comparison found a $3 million shortfall in licensing fees.

Because information on who files as a Nevada business is never compared with who applies for a state business license, there is no way to track which companies have failed to pay.

When for-profit businesses incorporate in Nevada, state law requires them to pay a one-time $25 fee for a Nevada business license. Companies physically located in Nevada are required to show a state license in order to get a local business license.

But many out-of-state firms that incorporate in Nevada never establish a physical address here. Because they do not need a local business license, they don't apply for a state license even though they are required by law to do so.

"We've been aware of the problem and have had that problem in the past," said Larry Scott of the taxation department. "We've been working with the Resident Agents Association and asking them to notify their out-of-state clients they have to pay the fee."

Resident agents are contact people for out-of-state entities that incorporate in Nevada.

Besides the licensing fee, for-profit businesses are also required to pay a quarterly business activity fee amounting to $25 per full-time employee.

"If they've got employees in the state, salespeople or whatever, then they'd have to pay," said Sam Lynch, owner of Luck Bear Enterprises and a resident agent.

"New companies don't have to provide a lot of information to the state, so there's no way they'd know," he said.

Scott Anderson, chief deputy for commercial filings at the secretary of state's office, said compliance with the licensing requirement is not policed by his office.

"The information is available to any other state agency that wants to look at it," he said.

But the tax department never sees the data, officials said.

"Our computer databases are not the same as the Secretary of State's office," Scott said. "The state's Task Force on Debt Collection is reviewing that problem."

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