What is an audit?
Why does the Department conduct audits?
Who will be conducting the audit for the Department?
What should I expect during an audit?
How should I prepare for an audit?
What records will I need to have available during an Audit?
How many years of history are normally examined during an audit?
What should I do if I disagree with the auditor’s findings?
How are appeals handled?
We reported gross revenues correctly on our gross revenue license, but we still owe additional fees. How is that possible?
What is a courtesy visit?
We’ve been asked to provide a Certification Statement with our audit. What is the purpose of this form? 

Transient Lodging
Who is exempt from transient lodging (room) tax?
What records are required to be kept for transient lodging (room) tax exempt items?
Are non-Nevadan state or local government employees qualified for the room tax exemption?
What is meant by "permanent resident/guest"?
Are other IRS tax exempt entities (i.e. charitable or non-profit organizations) qualified for the room tax exemption?
Are tribal governments and individual tribal members exempt from transient lodging tax?
Are government contractors exempt from transient lodging tax?
I am planning to purchase/sell an existing transient lodging establishment. Are there any special tax reporting requirements that I should be aware of?

What is an audit?
A Business License audit is an examination of the financial records of a business by the Department to determine whether the business has remitted the proper amount of license fees and taxes and is operating in compliance with provisions of the Clark County Code and any applicable franchise agreements. There are three possible outcomes to an audit. First, an audit may result in a notice that taxes and/or fees were properly remitted and no payment or refund is due. Second, an audit may result in a notice that a refund of overpaid taxes and/or fees are due back to the business. Third, an audit may result in a notice that additional taxes and/or fees are due from the business.

Why does the Department conduct audits?
The Department’s conduct of audits is very important to the public interest and the efficient administration of the self-assessed business license taxes and fees. Audits help ensure that taxes and fees are administered in a fair and uniform manner throughout the business community. Audits provide businesses with enhanced understanding of the business license laws so they can more accurately self-assess taxes and fees and better comply with the business license regulations. Audits often result in the early detection of matters requiring attention or correction by a business before they become a more significant problem.

Who will be conducting the audit for the Department?
Our auditors are trained financial professionals, knowledgeable of the business license laws, accounting systems and practices and our Clark County business community. Auditors are evaluated on their knowledge of accounting, business license laws, and audit techniques, as well as their productivity and communication skills. Auditors are never evaluated based on the amount of taxes and/or fees recovered during an audit.

What should I expect during an audit?
It is always our desire to conduct audits in a professional and courteous fashion with minimum disruption to the business and its accounting activities. We also strive to keep businesses well informed during an audit. The auditor should provide prompt and thorough responses to questions and provide reasonable up-front estimates of how long audits will take. The auditor should explain tax and compliance findings as well as audit appeal rights. All audit working papers and audit results are reviewed by supervisory personnel before they are finalized.

At the conclusion of every audit, businesses have an opportunity to provide written feedback to the department regarding the conduct of the audit and any issues or concerns that may have arisen as a result of the audit.

How should I prepare for an audit?
The auditor will contact you to schedule a mutually convenient date and time for the audit. You will receive written correspondence confirming the details of the appointment. Audits are usually performed at the business location; however, if circumstances make it impractical for the audit to be conducted at the business location, an alternate off-site location, such as a bookkeeper’s office may be acceptable. Regardless of where the audit work is conducted, the auditor will make an appointment to tour the business in order to become familiar with your operations, products and/or services, and facilities. The auditor will inform you which licenses are being audited and the periods to be examined for each license.

What records will I need to have available during an Audit?
The type of records required for an audit will vary depending on the type of license audited. For transient lodging tax audits, please see Clark County Code Section 4.08.085 for a complete list of documents required.

For flat fee licenses that are based on a number of units, an accurate accounting of those units throughout the audit period will be required.

For gross licenses, your auditor will discuss the records requirement with you when the audit is scheduled. This discussion will allow the auditor to create a list of required documents that is tailored to your business and accounting system. As a general rule, however, the following types of documents will be required:

  1. Copies of license renewal forms with supporting worksheets, calculations, and documentation of amounts reported for the audit period
  2. Audited financial statements for the most current fiscal/calendar year
  3. Monthly income statements for periods covered under the audit
  4. Month end general ledger reports or subsidiary ledgers listing gross revenues
  5. Monthly sales journals listing detailed transactions
  6. Revenue worksheet summarizing revenues by reporting period (the auditor will send this form to you to be completed prior to the commencement of the audit)
  7. Daily register summaries, sales invoices, z-tapes, and/or other supporting data for selected sample dates
  8. Chart of accounts
  9. Three most recent Federal income tax returns
  10. Copies of bank statement for periods covered under the audit
  11. Internal control questionnaire (the auditor will send this form to you to be completed prior to the commencement of the audit)

How many years of history are normally examined during an audit?
A normal audit will include three years of audit history unless the business has been operating without a license or the auditor has reason to believe that the business has made a fraudulent or material misstatement of its revenue. The auditor will advise you of any periods to be audited outside of the normal three-year audit period should there be any.

What should I do if I disagree with the auditor’s findings?
Simply discuss any unresolved issues with the auditor. Due to the numerous different types of accounting systems and methods of recording revenues, it is possible that the auditor was not aware of factors that may have affected the outcome of the audit. Our auditors should always be willing to consider any relevant and material information in an attempt to resolve any disputed issues. However, if you are unable to resolve the matter with your auditor, you have the right to appeal the audit results, as described in the following question.

How are appeals handled?
If attempts to resolve the issues with the auditor are unsuccessful, the business must submit documentation of the unresolved issues along with a copy of the final audit report to the audit manager of the department. The audit manager has thirty days to review the matter and inform the business of his or her decision. If the issues remain unresolved at this point, the audit manager must submit the documentation to the director of the department. The director has sixty days to review the matter and inform the business of his or her decision regarding the resolution of the issues. If the business remains unsatisfied with the director’s decision, the business may appeal the matter to the county manager by submitting a notice of appeal to the director of the department within ten days after receipt of the decision. The director will then submit the matter along with the documentation to the county manager. The county manager has sixty days to review the matter and inform the business of his or her decision. If the business is not satisfied with the county manager’s decision, the business may appeal the matter to the District Court of Clark County, pursuant to NRS 34.

We reported gross revenues correctly on our gross revenue license, but we still owe additional fees. How is that possible?
The semi-annual license fee is paid in advance and is based on the gross sales/receipts of the business. The standard fee payment represents a prepayment of fees based on estimated sales/receipts for the upcoming license period. At every license renewal, the six-month license renewal fee for the next period (the “in advance” period) is calculated based upon the “prior” six-month’s gross sales/receipts. Thus, during an audit, if the actual sales in that license period are greater than the amount the licensee estimated, an additional fee may be assessed based on the difference. On the other hand, if the estimated sales were greater than the actual sales, a refund of fee may be issued. For additional information, see the following memo issued by the Department describing this matter in greater detail.

What is a courtesy visit?
Courtesy visits are scheduled at newly licensed transient lodging establishments and supper clubs to help ensure that you have a good understanding of the record keeping and compliance matters involved in these businesses. The auditor will walk through your operations with you and take a look at your records. The auditor will alert you to any practices that could be a problem later on and provide advice on how to correct the matter. The auditor will share suggestions designed to make your recordkeeping more complete and accurate so that you’re ready in the event of a future audit. The auditor will discuss all the tax issues with you to help ensure that you have a full understanding of the law and the reporting requirements. This helps make sure that your business gets off on the right foot. This time is an opportunity for businesses to ask any questions they may have regarding their regulatory requirements. By taking full advantage of the auditor’s knowledge, asking questions and sharing any concerns, it is our hope that you will get off to a much more successful start in your new endeavor.

We’ve been asked to provide a Certification Statement with our audit. What is the purpose of this form?
This form is usually required when the business’ headquarters and primary accounting operations are located outside of Clark County or when greater assurance is desired regarding the completeness and reliability of the records provided. This extra assurance may serve to expedite the audit by minimizing testing requirements and/or time spent corresponding back and forth.

Transient Lodging

Who is exempt from transient lodging (room) tax?
Federal government employees, Nevada State employees, foreign diplomats, consular officers and staff members, federal credit union employees, foreign military, and American Red Cross and permanent residents. (see our Guidance letter dated March 20, 2014).

What records are required to be kept for transient lodging (room) tax exempt items?
Clark County Code 4.08.085 specifies the records that must be kept by Transient Lodging Establishments.

The Diplomatic Tax Exemption Program shows examples of tax exemption cards issued by various agencies. Also, see the GSA website and related sites for:

Are non-Nevadan state or local government employees qualified for the room tax exemption?
No. Non-Nevadan state or local employees are NOT qualified for the exemption.

What is meant by "permanent resident/guest"?
“Permanent resident” means any individual who has or shall have the right of occupancy in a sleeping room/space at the same transient lodging establishment for thirty-one consecutive days or more, and for whom rent is exempt from the transient lodging tax on the thirty-first day and every consecutive day thereafter, provided the individual continues to occupy or continues the right to occupy a sleeping room/space at the same transient lodging establishment. Clark County Code Section 4.08.005(14).

Per Clark County Code Section 4.08.050 (b), no transient lodging tax is imposed on rent received from permanent residents.

Are other IRS tax exempt entities (i.e. charitable or non-profit organizations) qualified for the room tax exemption?
No. IRS tax exempted status has no relation to the room tax exempt status in Nevada. All qualified room tax exempt categories are detailed in the Guidance letter dated March 20, 2014.

Are tribal governments and individual tribal members exempt from transient lodging tax?
No.  See Guidance Letter - Tribal Government  and Individual Tribal Members, dated September 27, 2006.

Are government contractors exempt from transient lodging tax?
No.  See Guidance Letter - Government Contractor, dated October 27, 2008

I am planning to purchase/sell an existing transient lodging establishment. Are there any special tax reporting requirements that I should be aware of?
Yes. See Guidance Letter - Tax Liability on Sale of Transient Lodging Establishment, dated September 15, 2008.

Last modified at 11/12/2015 6:31 by Wanda Norman