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Nevada Supreme Court Rules on Use Tax

Posted in Nevada Supreme Court, Taxes, Use tax

In Harrah’s v. State, Dep’t of Taxation, the Nevada Supreme Court entered a ruling potentially favorable ruling on taxes for goods purchased outside of Nevada.  Harrah’s, a Delaware corporation, purchased four passenger jets for purposes of transporting its employees and guests around the country.  The jets were delivered to non-Nevada locations, and subsequently transported passengers around the country, including consistently flying to and from Nevada.  Harrah’s paid use tax pursuant to NRS Chapter 372 but then requested a refund, which the Nevada Department of Taxation denied.  Nevada’s decision was upheld by two appellate bodies before the Nevada Supreme Court took up the matter.

The Nevada use tax relates to goods purchased outside of the state but were “purchased for storage, use, or consumption, and were actually stored, used, or consumed in Nevada.”  The use tax does not apply under NRS 372.258 if the goods were first used in interstate commerce or were used in interstate commerce for 12 months following their purchase.  The Nevada Supreme Court ultimately found that the jets met both criteria and that the use tax did not apply to Harrah’s jets.  The Court found that the amount of times the jets flew to and from Nevada was unimportant under the statute, largely because they mostly flew to other states and accordingly were involved in non-taxable interstate commerce.

Be careful before deciding not to pay use tax to the state because the specifics of the use of the asset will be important.  Not paying use tax is a misdemeanor.  That said, the Harrah’s case may open the door for potential challenges to the assessment of tax on certain kinds of goods used in interstate commerce.