Questions linger on casino meal tax
April 24, 2012
There were more questions than answers Monday during a Department of Taxation workshop on taxing complimentary meals given by casinos to patrons and employees.
The department said earlier this year that it would begin imposing sales tax on comped meals as of Feb. 15 and assess a 25 percent penalty as well as 9 percent annual interest on all taxes not paid by July 31.
The agency, however, is still trying to adopt regulations on how to collect the sales tax.
The issue has dragged on for years and has huge consequences for state coffers and casino companies in particular, as well as other businesses such as restaurants and taverns that provide meals to employees.
In 2008, the Nevada Supreme Court, in a ruling favoring John Ascuaga’s Nugget in Sparks, struck down imposing a use tax on free meals but left unresolved the question of whether such meals are subject to sales tax.
Since then, casinos around the state have petitioned for refunds of those use taxes, totaling hundreds of millions of dollars.
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In January, the Nevada Tax Commission rejected an appeal by Boyd Gaming Corp. and said the sales tax could be levied. That ruling upheld the findings of an administrative law judge who said employee and complimentary meals to patrons were retail sales and subject to sales tax.
Court challenges are pending.
John Bartlett, a Nevada Resort Association attorney who represented the Nugget in the 2008 case, said the agency’s move to adopt new regulations was premature, and he urged that the process be delayed until legal challenges over the sales tax assessment is resolved.
Others said language in the draft proposal would have broader consequences beyond casinos and restaurants.
Chris Nielsen, deputy taxation director, said meals provided as comps to gamblers belonging to casino club card programs – where the player must provide personal information to join – would be subject to sales tax at the retail rate. If a meal is listed for $15 on the menu, casinos would pay sales tax on that amount.
For employee meals, the sales tax would be based on the cost of the specific food to the employer.
Opponents said the draft language was vague. Would sales tax also apply to coupon freebies where no such loyalty club affiliation exists? What about partial comps, where a patron pays cash for part of the meal, and deducts the rest from reward points? How would the tax on those transactions be calculated?
Tax agency officials were unable to answer many of the questions. On several occasions, Deputy Attorney General Gina Session, a lawyer for the department, said some of those questions were beyond the scope of Monday’s workshop.
“We’re really looking for you to tell us if you have suggested language,” she said.
Bartlett said it was problematic to be “asked to comment about specifics of this language when I’m not exactly sure … what this regulation is aimed at.”
Nielsen and Taxation Director Bill Chisel said that the proposed regulation had not yet been through the Legislative Counsel Bureau to fine-tune language and that more public hearings would be held.