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Apr. 09, 2008
Copyright © Las Vegas Review-Journal

Attorney general wants tax status of free meals reviewed

By SEAN WHALEY
REVIEW-JOURNAL CAPITAL BUREAU

CARSON CITY -- The attorney general's office announced Tuesday that it will ask the Nevada Supreme Court to reconsider a March 27 ruling that free meals provided by casinos to patrons are not subject to taxation.

The 6-1 ruling prompted concerns from Gov. Jim Gibbons and lawmakers that the state's ongoing budget shortfall could grow by tens of millions of dollars.

The decision to ask the court to rehear the case of the Sparks Nugget versus the state Department of Taxation came after a closed-door meeting between the Tax Commission and the attorney general's office on Monday.

Nicole Moon, a spokeswoman for Attorney General Catherine Cortez Masto, said a legal analysis of why the court should grant a request to reconsider its ruling will be filed Monday.

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    • The state is finalizing more than $300 million in new spending cuts to the two-year budget. The total shortfall is projected at $900 million below original forecasts. The Supreme Court decision has not been factored into the shortfall because the financial effect remains unknown.

    The Tax Department has been collecting taxes on the free meals provided by casinos to patrons and employees. The ruling said the tax should not be collected, opening up the state to the potential of tens of millions of dollars in refunds.

    The ruling would result in about a $1.3 million refund to the Sparks Nugget. Other casinos have applied for refunds from the tax as well.

    If the decision stands, future tax collections would be lower because the meals are exempted.

    The attorney representing the Sparks Nugget could not be reached for comment on the request for a rehearing.

    The attorney general's office has not yet disclosed the legal reasoning behind the request for a rehearing.

    But state officials were looking at a footnote in the opinion that appears to offer a way to make the meals subject to taxation when there has been a transfer of personal property "for a consideration."

    The court said in the footnote that this type of transfer was not demonstrated in the Sparks Nugget case.

    "Still, we do not foreclose the possibility that complimentary meals such as the ones at issue in this case may be subject to sales tax where consideration is properly demonstrated," the court said.

    Requests for reconsideration are occasionally sought by losing parties but infrequently granted by the court.

    Rehearings can be granted if the court is found to have overlooked or misunderstood a relevant fact or if a question of law has been overlooked or misapplied.

    Contact Review-Journal Capital Bureau reporter Sean Whaley at swhaley@reviewjournal.com or 775- 687-3900.



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    douglas wrote on April 09, 2008 06:46 PM: seems to me that any giveaway that's claimed as a deductible expense by the donor must be considered as "income" by the recipient.

    that'd include the occasional "free" car, like that one pre-picked in some venetian drawing or even the "freeplay" redeemed from player's club/slot card "points" as lately adopted by the stations joints. and of course, free rooms, again if the joint makes any claim for the cost as a deduction.

    same as the edr [employee dining room] food furnished to casino staff.


    endrun wrote on April 09, 2008 02:17 PM: The attorney general should review the general practice of taxation on any complimentary matter.

    The tax should not have to be paid.

    However, why not consider a higher gaming tax( as they so desperately want to avoid?

    What are the gaming resorts going to do... call it a day and move out of Nevada? NOT!!!

    Maybe less grease to the juice?...That's what corrupt officials would be upset about.

    Anyone agree?


    dwc wrote on April 09, 2008 10:21 AM: Sheesh! So the law is the law, and the Supreme Court has the final say unless, of course, it affects those at the bloated trough? I'm entertained by this.


    ths wrote on April 09, 2008 07:33 AM: She is all worried about the state budget.

    Perhaps she should of thought about that when the state passed a law to crack down on the hiring of illegal imigration. She claims it is a federal jurisdiction that the state cannot deal with.

    That is the total opposite. The state has a huge financial burden when it comes to illegal workers from the uncollected health care costs, to other services lost.