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September 2, 2014

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Bill would shield comped meals to casino workers from being taxed

Image

Leila Navidi

The entrance to the Bacchanal Buffet at Caesars Palace on Tuesday, September 11, 2012.

Gaming companies and restaurateurs could win a tax break from the Nevada Legislature.

Assemblyman Harvey Munford, D-Las Vegas, wants companies to be able to serve their employees complimentary meals — or “comped” meals in Las Vegas parlance — tax free.

The legislation would get ahead of the Nevada Supreme Court, which has before it a case challenging the state’s assertion that it can collect sales tax on comped meals provided to employees and customers.

“They shouldn’t have to be taxed on their employee kitchen,” Munford said.

The legislation mirrors recent court decisions that are now before the state Supreme Court. Carson City District Judge Todd Russell ruled March 1 that comped meals for employees should be tax-free but meals provided to patrons are subject to sales tax. District Judge James T. Russell issued essentially the same ruling in Las Vegas on March 1 in a case involving Caesars Entertainment.

“The courts have already ruled in favor of taxing the gaming people,” Munford said. “That’s fine.”

Given the various court cases winding their way through the legal system, no casino is actually paying the tax on comped meals. Instead, sales tax becomes due under the earliest of four triggers that initiate the tax.

The comp meal fight has been drawn out over many years. It began with a 2008 Nevada Supreme Court ruling that the state owed a tax rebate to the Sparks Nugget, leading other casinos to also challenge the tax.

“This has been ping-ponging in court for years,” said Sen. James Settelmeyer, R-Minden, who is a co-sponsor of Munford’s bill. “An employer shouldn’t have to pay to feed an employee.”

Although gaming companies provide the majority of comped meals to customers, Munford’s bill could blast a sizable hole in Gov. Brian Sandoval’s proposed budget. Pending a court ruling or settlement declaring otherwise, his budget relies on this money coming in beginning July 1, 2013.

The actual cost of the bill has not yet been determined.

Assemblywoman Maggie Carlton, D-Las Vegas, signed onto the bill because she said casino employees often have no choice but to stay in the casino during breaks, so the casino provides comped meals to employees.

“This makes it perfectly clear that employers aren’t going to be taxed for those meals,” said Carlton, who is a former waitress at a Strip casino.

The Nevada Supreme Court ruled that the state “use tax” does not apply to comped meals. The court did say, however, that the state could possibly impose a “sales tax” on comped meals if it could prove “consideration” was given for the meals. Consideration means the state could prove casinos received something of value in return for the meals.

What “consideration” means is central to the current case before the Nevada Supreme Court.

The sales tax would be a higher tax because it uses the higher retail price of food as its base. The state calculates a use tax based on the cost of ingredients to prepare food, which doesn’t include the markup associated with retail price.

Munford’s bill says that all meals employers provide to employees should be “provided without consideration,” meaning tax free.

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  1. Not sure we can afford to eliminate revenue.

  2. The alternative is to charge employees for food. It's a good bill, good for casinos, good for workers. Go for it.

  3. It's a "no-brainer." No tax should be imposed where money does not change hands. Are those pencil-pushing unelected & unaccountable bureaucratic drones going to impose a tax on the "free" parking offered to patrons & employees alike? Yes, there's a tax on the physical structure itself, but not on the "presumed" cost that could be imposed for using the facilities. This is what happens when bureaucrats have too much time on their hands!