Assemblywoman Sheila Leslie, D-Reno, called the decision "horrible news" that will just add to the state's budget woes.

The state could be liable for as much as a third, or $50 million, of the refund total. Local governments and school districts would be liable for the remainder.

"To even think of coming up with $50 million more in cuts is just unthinkable to me," Leslie said. "But I guess we're going to have to."

Ben Kieckhefer, spokesman for Gov. Jim Gibbons, said the state Tax Department is reviewing its options with the state attorney general's office as a result of the order.

"Obviously it's not how we wanted it to go," he said. "We'll have to wait and see what they come up with."

The state has already cut $1.2 billion from the current budget due to lower-than-expected tax revenues. The impact of the refunds has not been factored in to the state's financial picture yet.

The Sparks Nugget contended in its appeal that the complimentary meals it provides to its patrons and employees are exempted from the sales and use tax as described in the state constitution.

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

Meals that are sold are subject to the sales tax.

The state Department of Taxation asked the court to reconsider its decision. The Legislature also sought a rehearing.

But the court, in a four-page order, denied the request.

The court said it rehears cases only when it has overlooked or misunderstood a fact or issue of law. It will not grant a rehearing to reargue matters of law the court already considered, it said in the order.

The court rarely grants requests for rehearings.

The ruling will have an ongoing impact on the state budget as the Department of Taxation processes the numerous requests from casinos and restaurants.

Dino DiCianno, executive director of the Nevada Department of Taxation, said in June that requests for refunds flooded his agency after the spring decision.

The ruling will means about a $1.3 million refund to the Sparks Nugget alone.

The Legislature introduced a bill intending to circumvent the court ruling at its special session on June 27, but the measure failed after Senate Republicans opposed it.

Gaming lobbyists had been pushing lawmakers to reject the measure. It passed the Assembly but failed in the Senate on an 11-10 party line vote.

Leslie said it was appropriate for lawmakers to try to clarify legislative intent on the collection of the tax at its special session. All 42 members of the Assembly supported the bill.

The Legislature should take the issue up again in February when it convenes in its regular session, as well as other tax exemptions in place now that could be modified or repealed, she said.

The Tax Department had 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 multiple requests for refunds.

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