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Apr. 15, 2008
Copyright © Las Vegas Review-Journal

FISCAL CONSEQUENCES: Costly court decision rehearing urged

Ruling will be devastating, Nevada argues

By SEAN WHALEY
REVIEW-JOURNAL CAPITAL BUREAU

CARSON CITY -- A recent Nevada Supreme Court ruling that said free meals provided to patrons by casinos are exempt from taxation has far- ranging and unintended results that could devastate the state's economy, the attorney general's office said Monday.

If the ruling is allowed to stand, it would cost the state and local governments an estimated $96 million from the refunds already being sought by more than 90 casinos, and much more if other casinos file for refunds. And it would come at a bad time for state government, which has been forced to trim budgets because of less-than-anticipated tax revenues.


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    • The comment came in a petition for rehearing in the case involving the Sparks Nugget and the state Department of Taxation. The Department of Taxation has asked the Supreme Court to reconsider its March 27 decision.

    The Tax Department has been collecting taxes on the free meals provided by casinos to patrons and employees for years. 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 but they have not been considered while the appeal in the Sparks case was under way.

    Also Monday, the Department of Taxation released information on the comped meal issue, showing that 92 casinos have applied for refunds from the state sales and use tax based on the same legal theory as put forth by the Sparks Nugget. The requests total $96 million when interest is counted.

    The state general fund share of this total is about $24 million. The public schools share is about $29 million and the local government share is about $43 million.

    The state general fund could be on the hook for at least some of the school portion as well.

    Further details were not released by the department, citing confidentiality requirements under Nevada law.

    But the economic impact is growing.

    "Please be aware that we are receiving additional requests on a daily basis since the Supreme Court decision that is not part of the above referenced numbers," said Taxation Executive Director Dino DiCianno. "At this point in time, it is difficult at best to estimate the additional amount of refunds as we go forward."

    In the petition for rehearing, Gina Session, chief deputy attorney general, said the Supreme Court did not consider legislative intent when concluding the meals were not subject to taxation.

    The court "should return to the canon of strict construction of tax exemptions, under which any reasonable doubt about the applicability of an exemption must be construed against the taxpayer," she wrote.

    The petition also asks that if the court is not persuaded to reconsider its decision, that the case be remanded for further fact-finding regarding whether the casino receives "consideration" for the free meals.

    The request is related to a footnote in the original decision that said the meals potentially could be 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 in its original decision.

    Requests for reconsideration are not granted often by the court.

    There is no word on when the court will act on the petition.

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

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    ET wrote on April 15, 2008 08:41 PM: This is not Rocket Science,make it a new law starting May 1 2008.


    Do they tax Justice Mike Cherry's Super Bowl Tickets wrote on April 15, 2008 08:20 PM: ??????????


    tim wrote on April 15, 2008 04:07 PM: the nv.supreme court says so.the casinos own them what else are they gong to say?the jokes on us.


    nvkorruption wrote on April 15, 2008 01:29 PM: Juice, in regards to your comment;
    '
    Even the Supreme Court of this State is in the pocket of the casino gambling (yes gambling) industry. '

    Once you really start digging, the Supreme Court is in everybody's pocket if it serves Just Us.

    In this case who benefits the most?

    Some things they do may appear they are working in the right direction..like for example, the Indigent Defense issue. But is only for appearence sake.

    If an indigent tried to seek the Supreme Court for correction of an injustice that has merit, they will slam the door in his face.

    Guinn v Nevada and the throwing out the 2/3 majority vote rule by the Supremes is a taste of what they will do next to Nevada voters on behalf of special interests.


    fluffy wrote on April 15, 2008 10:29 AM: The casino already paid sales tax on the stuff they bought to either sell or give away. Not to mention the people they got said stuff from paid taxes on it, too. I think the court got it right. Taxation by every entity is out of control. There should be a single tax rule on something.

    So, the law is pretty specific? Nice bit o' legislation. The highest court has issued it's ruling, and that's good until it affects the state? Come on!


    Juice wrote on April 15, 2008 08:21 AM: Even the Supreme Court of this State is in the pocket of the casino gambling (yes gambling) industry.
    And what about all the free meals that the casino workers are gifted?
    Maybe public employees should be served their meals at the City Hall or Clark county Building.


    The free ride should be over wrote on April 15, 2008 07:57 AM: A couple of days ago the millions one casino exec makes was made public. Yesterday, that same casino proceeded with a mass lay off of managers to cut cost. I think it was in the neighborhood of 400. However, the exec is still receiving his millions.

    The casinos have become all about a few making a profit and a living that exceeds what 10 working families make.

    It is absurd that we grant these few people and companies these tax breaks.

    When the exec's salaries are cut back then talk about tax cuts. Until then understand that they are only looking out for themselves. Their workers are disposable.


    vegloss wrote on April 15, 2008 07:34 AM: It's crazy. Even when the stores offer you something free, for example, buy this and get free milk, the store has to charge you sales tax.
    Are you afraid if you don't keep the hotels happy they will move there business to India or mexico?


    Mrstacy wrote on April 15, 2008 04:24 AM: The court got this one wrong. If you can hold a high roller captive on your property by offering a free meal, you are buying the opportunity that they will do more gambling.

    NLV Resident has it right, casinos can't opt out of all taxation. After all that is where the big money is.


    NLV Resident wrote on April 15, 2008 03:30 AM: And the casino industry wonders where the impetus for raising the gaming tax is coming from? Let's see, many casinos benefitted from decreased taxes related to the "green building" bill; now they're requesting refunds for comped meals. Does anyone really believe this industry is not ripe for an increase its tax rate?