Court overturns tax on casino employee meals

A federal appeals court Wednesday reversed a U.S. Tax Court decision that gave rise to a lengthy battle between the casino industry and the Internal Revenue Service over the free meals casinos provide their employees.

The ruling, by the 9th Circuit Court of Appeals in San Francisco, appears to completely undercut the IRS' campaign to charge employees taxes for the free meals they receive. It also appears to allow casino operators to deduct the cost of the meals from their taxable income.

However, the IRS could appeal the decision, either to the 9th Circuit Court for a re-hearing or to the Supreme Court. An IRS spokesman declined comment on the ruling.

The issue arises from a tax case filed against Boyd Gaming Corp. by the IRS. In that case, the IRS argued that only a very small percentage of employees qualified to receive tax-free free meals under U.S. Tax codes. Boyd countered that it is essential to casino companies to keep virtually all employees on premises during their shifts.

In September, 1997, the Tax Court ruled in favor of the IRS. Boyd appealed the case, which resulted in Wednesday's ruling.

Opponents of the so-called meal-tax cheered the ruling.

"This is a huge victory for the hardworking employees of the casino-entertainment industry," said Rep. Jim Gibbons, R-Nev. Nevada's Congressional delegation and the Culinary Union have fought hard against the meal-tax.

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