Ruling rebuffs casinos seeking refund of taxes paid on comped meals

By Cy Ryan

Tuesday, Jan. 24, 2012 | 2 a.m.

CARSON CITY — In a decision with far-reaching impact on the state budget and casino balance sheets, the Nevada Tax Commission ruled Monday that casinos must pay sales tax on comped meals given to players and their employees.

The commission, in this single case, rejected an appeal by Boyd Gaming Corp. and its 12 casinos in Clark County, which were seeking a refund of the taxes they have paid.

The 6-1 decision will mean hundreds of millions of dollars in refunds being sought by casinos statewide will stay with the state. Every casino in the state has a similar appeal before the tax commission. Next up is Caesars Entertainment.

The commission decided that sales tax would be based on the retail price of the meal.

John Bartlett, attorney for Boyd, argued that complimentary meals were not taxable because no money changes hands. There is no sale and therefore there can’t be a tax.

“Every casino has a player club,” Bartlett said. “It’s part of the marketing program.”

He asked the commission to order a full refund of the tax, plus the interest. There was no immediate estimate on how much the Boyd company sought.

But Deputy Attorney General Blake Doerr, who represents the tax department, told the commission there is no requirement for money to change hands for it to be considered a sale.

“The patron must gamble to be eligible for a comp,” Doerr argued. Casinos use the full retail price of the meals in figuring comps in their accounting practices. And union contracts call for free meals for workers in many of the casinos.

Doerr said employee meals are bargained for — “the employee agrees to work and employer agrees to provide meals.”

The Nevada Supreme Court in 2008 ruled that the tax department could not apply the tax to complimentary meals at the Sparks Nugget but the state could levy the tax if the casino meal was for “consideration.”

The tax department argued there is a “consideration” in the cases at issue since the customer must play slots or table games to be eligible for the free meal. “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.

The commission upheld the decision of Administrative Law Judge Dena Smith, who ruled that employee and complimentary meals to patrons were retail sales and subject to sales tax.

Smith said that the use tax already paid by the casinos on its purchase of food should be credited against the sales tax due. But she said that fairness prevents the tax department from assessing any additional taxes, penalties or interest.

After the ruling by the commission, Commissioner David Turner predicted that Boyd Gaming would take its appeal to the Nevada Supreme Court.

The lone dissenting vote was cast by Commissioner Robert Johnson of Las Vegas.