Panel approves tax rule on comped meals
June 26, 2012
The Nevada Tax Commission on Monday approved a regulation reinstating taxes on free or discounted meals that casinos and restaurants serve to employees and customers.
The 5-2 vote came after a lengthy debate and testimony by a number of restaurateurs and tavern owners who said the tax would be a burden on them.
Ed Lapere of the Nevada Restaurant Association described the sales tax as “extremely burdensome to small operators.” Lapere especially objected to the fact that the commission announced plans to reimpose the tax in February and made the regulation retroactive to that month, saying the amount that has built up since then would be a big hit to operators.
Members of the commission made it clear that they understood that, and they intend to put on the next agenda a plan to move the effective date of the tax to the first of the month after the effective date of the regulation – probably Aug. 1.
Members of the taxation staff, along with vice-chair Joan Lambert, pointed out this isn’t a new tax – that is simply puts back into place a tax that operators either did pay or should have been paying until the Nevada Supreme Court threw out the tax in 2008.
The high court sided with the Sparks Nugget in its argument that comp meals for patrons and employees don’t qualify as a business transaction. But that decision said they could be taxable if there was “consideration” involved.
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Arguing that consideration is involved with patrons, because they have to be regular gamblers to get the comp meals, and for employees because it encourages their continued employment to receive the benefit, the Tax Commission decided to put the tax in regulation.
Taxation Director Chris Nielsen said the Legislative Counsel Bureau’s legal division agreed that the commission had the authority and developed the regulatory language to do so.
The regulation defines a complimentary meal to a patron as a sale and, as such, is taxable. It does the same with reduced-cost or free meals to employees. The only difference is that the sales tax must be paid at retail price of the meal for patrons, but only at the cost of the food products for employee meals.
Several association spokesmen, including Lapere, Brian Wachter of the Nevada Retail Association and Carole Vilardo of the Nevada Taxpayers Association, argued that the commission should hold off until after the state Supreme Court decides two pending cases on the subject. John Bartlett, representing the Nevada Resorts Association, said the regulation should wait until the litigation is resolved because, “we need to have a final and comprehensive decision that resolves the matter.”
Vilardo said proper notice wasn’t given to all those affected. She said that casinos and taverns were notified but that other food providers, such as hospitals and airlines, never received notice.
Nielsen said associations representing a wide variety of food sellers were notified to tell their memberships. He said he believes that adequate notice was provided without having to try to identify some 200,000 businesses to send notices to.
Lambert said that because the tax was in place and collected until the 2008 ruling, “this is not really anything new.”
Chairman Bob Barengo backed her up: “It’s the same tax that has always been there.”
He said either the businesses protesting were paying it before, or should have been. Commissioner John Marvel said it was time to “bite the bullet” and pass the regulation. He said if the Supreme Court or other factors change things later, the commission can deal with it at that time.
But several members indicated they were willing to talk about changing the effective date from Feb. 15 to after the regulation is approved by the Legislative Commission and signed by the secretary of state so that restaurateurs aren’t hit with the back bill.
The vote came after the commission rejected petitions by several casinos seeking refunds of taxes on comp meals and employee meals they paid between 2005 and 2008, when the Supreme Court ruling came down.