The court noted the state constitution has an exemption from the sales and use tax for most "food for human consumption."

The Sparks Nugget contended that the complimentary meals it provides to its patrons and employees were exempted under this provision because the uncooked food used to prepare those meals qualified as food for human consumption at the time of its initial purchase, and no taxable event occurred thereafter.

The court majority agreed, saying no taxable event occurred between the tax-free purchase of the food and when it gave the meals away.

The food delivered to the Nugget is exempt from the sales and use tax. When it is sold in the casino's restaurants the tax is collected. But sales tax was not collected on its comped meals by the casino.

Instead, the Department of Taxation was charging the casino a "use tax" on the food used to prepare free meals.

John Bartlett, the Carson City attorney who represented the Sparks Nugget in the case, said the refund request for just the Nugget for the period identified in the opinion totals about $1.3 million.

Other casinos have filed similar requests for refunds, which were put on hold pending the Supreme Court ruling, he said. Refund requests can be made for taxes paid going back three years and one month, Bartlett said.

Nevada casinos have been paying the use tax all along, a practice that this opinion should now change, Bartlett said. He said the financial impact of the ruling is "going to be pretty big, I think."

In May 2002, the casino filed a claim with the Tax Department seeking a refund on the use taxes paid between April 1999 and February 2002. The casino claimed the food it purchased and used for complimentary meals was not subject to either the sales or use tax. The Tax Department denied the claim.

On appeal, Washoe County District Judge Brent Adams sided with the Tax Department, and the Nugget then appealed to the Supreme Court.

But the Supreme Court said the free meals are exempt from tax because the food purchased initially was exempt, and the tax on immediate consumption would not apply until the food was prepared and "sold."

Justice Michael Douglas dissented, saying the majority opinion is contrary to the language of the Nevada constitution.