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Nevada’s business climate often receives kudos from national publications, especially due to its friendly tax code. The Silver State is one of few in the nation without a corporate or personal income tax. However, there is ample evidence that other aspects of Nevada’s legal and regulatory structure are far less friendly, especially to new businesses and those that challenge the status quo.
Dotty’s first brought its business model to Nevada in 1996. The décor and layout of Dotty’s, quiet and well-lit with a comforting atmosphere, broke from the typical sports bar model and were designed to appeal to women. Regulators who approved these taverns at the time figured Dotty’s wouldn’t make it.
But Dotty’s thrived. From a handful of outlets in Southern Nevada at its inception, Dotty’s now has more than 100 locations statewide.
During the recession, while other businesses were drastically and desperately cutting back, Dotty’s was expanding. The company bought several taverns on the brink of closure and occupied many retail spaces that otherwise would have been, or actually had been, empty.
Dotty’s’ success from its innovative business plan was not met by applause from regulators, competitors and elected officials, but instead made them a target.
State law allows certain businesses to obtain restricted gaming licenses permitting them to operate up to 15 slot machines. One requirement of the law is that the gaming revenue must be “incidental”, though that term is not defined. Until recently, for any business awarded a tavern license, gaming revenue was assumed to be incidental.
In 2011 the Clark County Commission enacted an ordinance intended to clarify which businesses could be classified as taverns, designed to exclude the Dotty’s model. Later that year, the Nevada Gaming Commission essentially extended those same regulations to the entire state. The new regulations applied not only to new locations, but to most existing outlets as well.
Dotty’s and other companies that had adopted similar models spent millions of dollars to comply with the new regulations while still attempting to maintain the same atmosphere that attracted their customers. But that wasn’t enough.
Last week the Clark County Commission by a 6-1 vote enacted a new ordinance governing taverns, again designed to regulate the Dotty’s model out of existence. This ordinance also applies to many existing locations and Dotty’s expects to have to pay millions to renovate its taverns to comply with this ordinance, if it can even do so while maintaining the characteristics that appeal to its target customer base.
The day before Thanksgiving, the ride-sharing company Uber suspended operations in Nevada after a District Court judge issued a preliminary injunction prohibiting the company from operating in the Silver State.
Though it claimed to be a technology company, Uber had run afoul of Nevada’s restrictive transportation laws, which essentially require new entrants to the industry to obtain the permission of existing companies in order to operate.
Officials with the Nevada Transportation Authority had been ticketing Uber drivers and impounding their vehicles. Nevada Attorney General Catherine Cortez Masto went to court to obtain an injunction against Uber, which she obtained on November 26.
The battle between Uber and the taxi companies has fostered passionate debate from both sides of the argument. Uber backers say the company’s app is a technological advancement for the transportation industry that can’t be ignored in a state that views itself as technologically progressive, especially since Uber operates successfully in markets all over the world.
Traditional taxi industry supporters say Uber drivers aren’t as safe because they aren’t policed by regulatory bodies whose mission is to provide safe transportation to the riding public. They cite numerous incidents in which Uber drivers have been involved in accidents and incidents involving involving assaults and police chases.
The Uber debate also has put a spotlight on Nevada’s transportation regulatory system that critics say is antiquated and protectionist.
Licenses and Fees
The examples of Dotty’s and Uber are not the only cases in which Nevada’s legal and regulatory structure is less than friendly, especially to new and innovative companies. A 2012 study by the Institute for Justice ranked Nevada as the 4th most extensively and onerously licensed state and its licensing laws as the 3rd most burdensome among the 50 states.
Among the findings of the IJ study were that “Nevada is the most expensive state in which to work in a licensed lower- and moderate-income occupation” and that Nevada “charges the most of any state for a contractor’s license.”
Nevada is one of just 20 states that require licensing of animal trainers. These licensees are subject to by far the highest fees of any state. Animal trainers in Nevada must pay $770 in fees, more than 3 times the fees of any other state and 8 times the average fees of states that charge them.
Nevadans, however, can be thankful that their state government is fighting the scourge of mismatched throw pillows.
Nevada is one of only four jurisdictions that license interior designers, requiring one exam, $250 in fees and six years of education or experience; meanwhile 47 states do not license interior designers. On average, the 21 states that license travel guides require $191 in fees and 58 days of education; Nevada requires $1,500 in fees and two years of education.
In some cases the Silver State’s licensing requirements seem to be upside-down.
Nevada also imposes burdens that appear out-of-line with concerns about protecting public safety. Emergency medical technicians can earn a license with just about 26 days of training. This is far less training than required of barbers, mobile home installers, cosmetologists, makeup artists, skin care specialists, manicurists and massage therapists.
Burdensome licensing requirements impose barriers on new and innovative companies and protect incumbent firms from competition, activities that appear to be prevalent in the Silver State. While the legend of Nevada’s business friendliness persists, the reality is that onerous laws, regulations and fees favor incumbent businesses and make it much more difficult for new and innovative firms to compete.
[Header image from Shutterstock.com]
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