The Board of Examiners on Tuesday approved a $4.5 million payment settling the legal battle over whether complimentary meals casinos give to patrons and employees are taxable.
Under the agreement, the state will give tax credits totaling $3.1 million to taxpayers still in business and pay $4.5 million to a group of employers no longer in business. The state also agreed not to try to pass legislation that would impose taxes on those so-called comp meals in the future. If a future Legislature decides to try to impose the tax, the deal will be off and Nevada back on the hook for a much larger payment if it loses in court.
In return, those casinos will drop lawsuits demanding repayment of $233 million in taxes and interest built up from 2001, when those resorts began protesting the meals taxes, to 2008, when the Supreme Court ruled those meals are not subject to the use tax.
“This is a revenue stream the state has not received the benefit of since that decision in 2008,” said Taxation Director Chris Nielsen.
He said the settlement is a good deal for the state because it gets rid of that potential $233 million debt.
Director of Administration Jeff Mohlenkamp said it’s a good deal not only for the state but for school districts and local governments that also get a share of the sales and use tax and would also lose money. He said that of the $4.5 million the state must actually pay out, about $1.2 million is general fund money. But an additional $1.4 million, he said, is the local school support tax that goes to school districts.
“That school district amount is a state liability as well because if the school districts come up short, we have to make them whole,” he said.
The remaining portion of the $4.5 million is on the backs of local governments around the state.