Casinos hope to avoid paying new payroll tax

Tuesday, Aug. 5, 2003 | 11:04 a.m.

Workshops on regulations to implement the new taxes passed by the Legislature are set for 9 a.m. Aug. 7, 14, 21 and 27 in Las Vegas at the Sawyer State Office Building and in Carson City.

CARSON CITY -- Business and casino interests expressed confidence Monday they would not be hit with a new higher payroll tax enacted by the 2003 Legislature to target banks and other financial institutions.

The law that was hastily drawn in the closing days of the Legislature's second special session imposed a 2 percent payroll tax on financial institutions and a 0.7 percent tax on other business.

Some anti-tax activists have suggested the law is unclear on whether holding companies and businesses that give credit, such as casinos, auto dealerships and others were inadvertently included.

"Obviously there is some confusion here," said gaming lobbyist Harvey Whittemore, who represents the Nevada Resort Association. "But I don't think it is going to result in us paying the tax at the 2 percent level."

That ultimately will be decided by the regulations the state Tax Commission writes to implement the law. The commission got its initial briefing Monday by videoconference in Reno and Las Vegas.

One difficulty the commission will have is a lack of legislative testimony to guide its members because the bill was drafted behind closed doors and not openly debated in committee.

Staff members will begin workshops Thursday to start drafting the regulations and will continue throughout the month, Deputy Director Dino DiCianno said.

"There is a clear indication the way the bill was drafted that gaming entities are not to be included under that portion of the law that would have to pay the 2 percent," Whittemore said.

Sam McMullen, lobbyist for the Las Vegas Chamber of Commerce, said the financial-institutions tax was "only supposed to be on entities that hold investments or assets for other people in terms of managing them."

He said it was never supposed to be all companies that hold stock.

"It was not the generic definition of 'holding company,' " McMullen said. "I have every faith it can be interpreted and implemented correctly."

But Tax Commission member David Turner predicted the process may not be as simple as the lobbyists think.

"There's going to be some wars over definitions," he said.

One section of the bill says the 2 percent tax applies to businesses engaged in lending money and providing credit.

"Does that mean the used car dealer? I don't know that. Does that mean Macy's, Penney's, Sears? They're providing credit," he said.

"There will be some arguments about that," Turner said. The commission will have to determine the intent and "where do you draw the line."

Commissioner Joan Lambert said the regulations will further define the law and there are sure to be some questions on other items as well. For example, there's an issue whether brothels with seating capacity of more than 300 will come under the 10 percent live entertainment tax.

There's also a question about a health care deduction in the payroll tax. A business will be able to deduct from the total payroll the cost of health insurance. Lambert said it must be decided if the deduction goes only to health care or if vision and dental are included.

"The devil is in the details," Lambert said.

DiCianno said his priority for drafting regulations will be the payroll tax, the bank tax and the entertainment taxes. He said teams in the department are working on preparing preliminary regulations to be unveiled this month at four public hearings.

George Molnar heads the team drafting proposed regulations for the business license and registration fees; Pauline Resnick leads the unit working on regulations for the bank and financial institution taxes; Cathy Chambers is working on the live entertainment tax regulations; and Linda Bailey is directing the work on the modified business or payroll tax, he said.

Tax Commission Chairman Barbara Smith Campbell said drafting the tax regulations is going to be a "consensus-building procedures." She said the general public will have access to the team leaders to make suggestions.

The state used to impose a one-time $25 registration fee on business. Now that goes to $100 a year and includes more businesses. Lambert said there may be thousands more who now have to pay the fee and she wondered how they would be notified.

She said the $25 fee was started in 1991 and some businesses did not know about it until 1998.

DiCianno said the department "is going to leave no stone unturned" to notify the business community. But he said there are businesses that do not read the newspaper, do not have computers and do not accept mail. He said these businesses that have not registered before will be given until July 1 next year to pay the business tax. After that they will face a $100 penalty.

DiCianno said the workshops "must be an open process" to get the ideas of those involved to get a consensus on the language in the regulation.

The commission will ask Gov. Kenny Guinn to allow the commission to write emergency regulations before the major taxes come on line on Oct. 1. They would be in effect 120 days while the permanent ones are prepared and approved.

The cigarette tax, increased by 45 cents per pack, has already become effective. The 75 percent increase on liquor goes into effect Aug. 1. The payroll tax, the bank tax and the real property transfer tax of $1.30 per $500 of value go into effect Oct. 1. The $7,000 per year excise tax on branches of banks, above one, and the live entertainment tax become effective in January.