Editorial: IRS throws in towel on casino meals tax

Friday, July 23, 1999 | 9:37 a.m.

The Internal Revenue Service wisely decided Wednesday to forgo challenging a federal appeals court decision in May that found the IRS could not impose a meals tax on casino employees. The IRS previously asserted that a free meal given to a casino employee while on his shift was, in effect, taxable income. In addition, the agency had prohibited the casinos from deducting the costs of employee meals from taxable income, essentially raising their corporate taxes.

What the IRS failed to account for was the unique character of casinos and how they operate differently than many other businesses. The gaming industry properly noted that these meals are necessary for employees who don't have enough time to leave the casino, buy lunch elsewhere, and then return in time when their shift resumes. As the Sun's David Strow reported Thursday, employees involved with games and who handle money must adhere to check-out procedures when leaving the property, making it impractical for them to leave the casino for lunch.

While it is a shame that the IRS insisted on waging its battle with casino employees for three years, at least it decided not to waste any more time on this issue by appealing the 9th U.S. Circuit Court of Appeals decision to the U.S. Supreme Court. The IRS has said it wants to be a more customer-friendly agency, so it is hoped it has learned from its mistake here. In the future the IRS would be helped if it didn't always take a cookie-cutter approach when interpreting the nation's tax laws, instead recognizing the subtle differences that may exist among various industries.