Nevada casinos get split ruling in comp meal tax dispute

A state judge today overturned efforts by the Nevada Tax Commission to force casinos to pay sales taxes for free meals they provide to employees.

But in a setback for the casinos, Clark County District Court Judge Gloria Sturman ruled during a hearing that complimentary meals provided to gamblers are taxable.

Sturman ruled in a lawsuit filed by Boyd Gaming Corp., whose attorney John Bartlett promised an immediate appeal to the Nevada Supreme Court of her ruling on comp meals provided to casino players.

Sturman agreed with the Tax Commission that providing meals to players in casino loyalty clubs like Station Casinos' Boarding Pass program is a taxable event involving a transfer of value.

"Consideration'' is involved because the casinos bargain with players by inducing them to gamble by offering free meals. Both sides receive something of value in this transaction, she said.

"They're not giving you that meal out of the goodness of their heart," Sturman said.

If her ruling is upheld, gamblers would have to start paying sales taxes for the full value of meals they obtain by redeeming players club points. For instance, if someone goes to a buffet today charging $15 and uses $10 of players club points to pay and $5 in cash for the difference, the customer would be taxed for just the $5. Under the Tax Commission plan upheld by Sturman, the player would pay the sales tax on the entire $15.

Bartlett argued casino slot clubs are promotional programs. Under this theory, the $10 in points redeemed for a $15 buffet is the equivalent of a promotional discount or a coupon.

But attorney Blake Doerr, representing the state Department of Taxation, said points redeemed for meals are not coupons, but "currency."

"It's a retail sale. It's a taxable sale," he said.

But when it comes to free employee meals, Sturman said there’s no bargaining for a transfer of value involved when casinos offer free meals to employees, union and nonunion, as no casino employee has ever agreed to be taxed for receiving such meals.

Richard McCracken, an attorney representing the Culinary Union, suggested to Sturman that one reason the Nevada Legislature has never authorized the taxation of free meals provided to casino workers is that to do so would be political suicide.

''Any state legislator voting for such a plan would serve out the end of that term and never serve again," he said.

McCracken said taxation of such meals could be seen as the equivalent of a personal income tax, something Nevada doesn't have.

"Aren't we getting close to an income tax with this?" he asked.

But Doerr unsuccessfully argued the free meals for workers involves a taxable exchange of value.

"The employee only gets it if he comes to work. They provide something of value by showing up to work," he said.

The case and others like it in other Nevada courts involve hundreds of millions of dollars statewide in casino tax refund claims and will all likely ultimately be resolved by the state Supreme Court, unless the Legislature steps in.

Boyd Gaming alone currently has some $14 million at stake in the dispute, Bartlett said.

Sturman's ruling came in a lawsuit filed by Boyd in February in which Boyd challenged Tax Commission findings that there is "consideration" provided in exchange for the comp meals.

In the Tax Commission's view, the consideration involves gamblers spending money to earn points they exchange for food, and employees working partly in exchange for their meals.

Complicating Sturman's ruling is that casinos have been applying for refunds of an old use tax they paid for complimentary meals between 2000 and 2008, when the Nevada Supreme Court struck down the use tax.

The Taxation Department has been arguing they won't necessarily get full refunds because of its new rules on sales taxes — replacing use taxes — for employee and gambler comp meals. It may take another ruling by the Supreme Court or legislative action to clarify the amount of the refunds the casinos will receive, if any.



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  1. Complimentary meals to employees are often leftovers feed to staff as a convenience to the employer. They keep employees on task and often meal periods are cut short due to the demands of business. It is hardly a luxury.

  2. oldPSUguy,

    I challenge you to find a single casino that feeds their employees left overs. Many of them today have separate chefs and kitchens.

  3. There is NO sale and it costs the casino. In other words it's an expense. Why should that be taxable? Answer. It shouldn't.