Casino workers who dine in-house face new tax

Monday, Jan. 26, 1998 | 10:56 a.m.

The move is a result of a decision requiring casino workers to pay income taxes on free meals provided by casinos, which often require employees to stay inside the establishments during their breaks.

Bartenders, cocktail servers, bar backs, maids, valets, bell workers, accountants and marketing staffers are among those who would be affected.

Food service workers and dealers can still take the free meals without tax consequences.

The new tax results from a Sept. 30 ruling by the U.S. Tax Court involving Boyd Gaming Corp. The court declared that the casinos can no longer take deductions for providing free meals to all their employees.

The ruling could have a significant effect on the gaming industry, executives say. It would require companies to substantialy modify their accounting and personnel policies. It also opens questions of corporate liability for employment taxes and will affect the tax returns of casinos and thousands of indivuals.

The ruling already has casinos and the Nevada congressional delegation scrambling to cut a deal with the Internal Revenue Service. But the industry and its friends in Congress have virually no leverage with the IRS.

In a Dec. 16 letter to IRS Commissioner Charles Rossotti, Nevada's two senators and two House members asked for cooperation.

Casino employees, "long accustomed to receiving meals as a tax-free benefit, may suddenly be liable for taxes on the value of these meals," the delegation wrote.

Rick Darnold, vice president of tax and financial administration for Boyd Gaming, said the ruling is inherently unfair because it will require casinos to treat employees differently.

"It's a messy proposition we have to deal with," he said. "People who really get hurt in this situation are the maids. They get paid hourly, not like executives. I'll get taxed a couple of dollars and can handle that better than a maid. That is the unfortunate aspect of this case."

While Boyd has until next month to decide whether to appeal the ruling, Darnold is doubtful that an appeal will be pursued, saying the company has "done almost all we can do in the courts."

The American Gaming Association, the industry's chief lobbyist in Washington, D.C., has asked for opinions from three law firms about the chances for appeal, and say no one is optimistic the ruling will be overturned.