Legal opinion protects Carson City tax revenue
August 11, 2018
The attorney general's office has issued an opinion that, indirectly at least, protects a key piece of Carson City's monthly sales tax revenues.
The opinion says the Department of Taxation can legally use a different method of distributing tax revenue for the Basic City-County Relief Tax that goes to local governments than it uses for the Local School Support Tax.
Under long-standing Taxation rules, the LSST goes to the school district where the retailer is located but the BCCRT revenue goes to the county where the purchase was delivered.
That means if a Reno resident makes a purchase in Carson City and has it delivered to his home or business in Reno, the sales tax charged is the Washoe rate and Washoe County gets the tax revenue. If the buyer takes delivery in Carson City, the Carson City rate is charged and Carson City gets the revenue even though the buyer lives in Reno.
The issue is especially important for major purchases such as a car or truck. Auto sales are Carson's largest sales tax category, accounting for nearly a third of monthly taxable sales and a large percentage of Carson auto sales are to Washoe County residents but delivered to the customer at the Carson City dealership.
The same applies to Churchill County where car dealers there also market heavily to Washoe County residents.
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The issue was raised by the governor's executive branch auditors. They questioned whether it was legal for Taxation to use a different methodology for distributing the BCCRT than they use for distributing the LSST.
The opinion states the fact both pieces of the sales tax are governed by nearly identical statutes, "does not necessarily require that they be distributed in identical manners."
While that Attorney General's opinion is about the distribution method and not directly who gets the money, it raises the question since Carson City relies so heavily on the auto portion of sales tax revenues.
The statewide sales tax rate in Nevada is 6.85 percent but many counties have added optional rates for specific needs and uses ranging from open space purchases to flood control and road construction. While the rate in Carson City is 7.6 percent, the rate in Washoe County is now 8.265 percent.
That two-thirds of a percent difference comes to $266 on a $40,000 vehicle and Carson auto dealers use that tax difference to encourage buyers to come here.
Under the current regulation, not only does the buyer pay a lower sales tax in Carson, the BCCRT revenue collected goes to Carson City rather than Washoe even if the buyer lives in Reno. The same applies to auto sales in Churchill County, where dealers also tout their 7.6 percent sales tax as an incentive to draw Washoe customers.
Washoe officials have made it clear in the past they would like the rule to require imposition of their tax rate on all purchases by their residents, even if the purchase occurs outside of Washoe County — and for the tax collected to go to them.
Carson City, obviously, likes the rule just the way it is.
A different opinion could've opened the door to more significant changes that could impact Carson City as well as Churchill County.
Changing the rule, however, would also cost Washoe County some revenue since many people and businesses in surrounding counties come to Reno to buy things that just aren't available or are more costly in the rural counties — such as major appliances.
The opinion says the existing methodology doesn't violate the law and, in fact, is supported by legislative history. Changing the distribution methodology, the opinion states, "would upset the predictability of the revenue streams on which the counties and school districts currently rely."
It concludes using different distribution schemes for the LSST and BCCRT taxes is within Taxation's discretion, "based upon the Legislature's apparent intent to fund school districts and local government operations according to different distribution methodologies."
"They upheld the current law which, frankly, Carson City relies on in many ways," said Mayor Bob Crowell.