LAS VEGAS -- During these tough economic times, government officials at all levels are looking for untapped revenue. The Nevada Secretary of State believes he's found some in the form of millions of dollars in fraudulent business license exemptions.
In Nevada, certain types of businesses don't have to pay the annual $100 fee for a state business license. Among them are government entities, motion picture companies and some home-based businesses.
More than 60,000 companies last year claimed the home-based business exemption -- many of them fraudulently. So, what it means for the legitimate business next door?
As the economy puts some local restaurants out of business, Rachel's Kitchen in Summerlin is expanding this week. Owner Debbie Sofer-Roxarzade, the restaurant is named for her daughter, lists hard work as her recipe for success as well as complying with government regulations.
"I would never think twice about not having a business license. Especially now with the move, just to get open, you have to have all of these licenses in place just to open up your doors," Sofer-Roxarzade said.
Yet while Roxarzade complies, others don't. "We have so many cheaters out there," said Nevada Secretary of State Ross Miller who suspects tens of thousands of businesses are not complying.
Case in point, some 60,000 entities are currently avoiding the state's annual licensing fee by claiming to be home-based businesses earning less than $27,000 a year.
"We have a hole that's about $24 million over the biennium that has grown out of this issue and a substantial number of companies that are claiming exemptions that they're probably not entitled to," said Miller.
Armed with the secretary's list, the I-Team uncovered example after example of local businesses like Sacred Center Tattoo, Smokes and Stuff, and Las Vegas Exotic Car Rental that are exempted as home-based businesses yet currently operate out of commercial spaces.
And then there are the household names -- like the Lingerie Football League, The Fashion Bug and Wells Fargo Investments -- all claiming to be home-based businesses earning less than $27,000 last year.
"Now we're in the unfortunate position of trying to verify a lot of this information," said Miller. Verification is a challenge as the I-Team discovered. After more than three weeks of back and forth, Wells Fargo Investments has yet to provide an explanation. The Fashion Bug acknowledges a clerical error involving its Reno store and has recently taken steps to correct it with the Secretary of State. And the Lingerie Football League just never responded.
That's not to say that the home-based business exemption doesn't have its place. Take reality television star Patti Stanger of the Millionaire Matchmaker. She has two companies registered in Nevada. There is one she pays for and one she doesn't.
According to the Miller, the second, Millionaire's Club International may legitimately qualify for the exemption. Stanger tells the I-Team it has no offices and generates no income.
"I think it goes opposite of the direction that has made Nevada a successful filing state in the first place. Now, all of a sudden we're going to have to become more bureaucratic to verify this information because we have so many cheaters out there," said Miller.
Back at Rachel's Kitchen, the licenses hang on the wall waiting to occupy space in the restaurant's new location.
"There's honest business people that are hardworking that spend our money on the things that are required of us and it's not fair to hear that your neighboring business doesn't have a license. I'm spending my hard earned money and they should be too," said Sofer-Roxarzade.
The Secretary of State says he has already sent notices asking businesses claiming the home-based business exemption to verify their eligibility. If they cannot, they must file amended licensing documents and pay penalties for each year they took the exemption improperly.
And a footnote -- the owner of Las Vegas Exotic Car Rental says he was unaware his company was claiming the exemption and the Secretary of State confirmed he immediately remedied the error as soon as he became aware of it.
