Tax department says casinos won’t be hit with new tax

Thursday, Aug. 14, 2003 | 9:40 a.m.

CARSON CITY -- Casinos apparently will not have to pay the new higher payroll tax assessed to banks, under proposed regulations drafted by the state Taxation Department.

The department is holding a public hearing today on the proposed regulations on imposing the 2 percent payroll tax on financial institutions and the 0.7 percent payroll tax on general business.

The $863 million tax law, passed by the 2003 Legislature, said businesses lending money and giving credit would be included in the financial institutions tax. That sparked some fear that casinos, car dealers and others that extend credit might be hit with the higher levy.

But the first draft of the bank tax regulation, released Wednesday, says the tax does not apply to any companies whose lending activities "are merely incidental to its ordinary business operations."

The Taxation Department said that if the interest and finance charges account for between 5 percent and 10 percent of the company's net operating revenue, that is incidental to the business operation. Harvey Whittemore, lobbyist for the Nevada Resort Association, said that is a "good first step," by the taxation department on its proposed regulations.

He said that would exclude casinos from the 2 percent payroll tax. The clubs extend credit but usually discount the IOU to entice the player to return to gamble again, he said. They don't earn between 5 percent and 10 percent of their net revenue from these credit practices, he said.

The taxation department has stressed it wants the public to help in drafting the regulations, which must be approved by the state Tax Commission later this year. The payroll tax is scheduled to take effect Oct. 1.

The proposed regulations say if a business opts to report wages for employees not physically located or working in Nevada to the state Division of Employment Security, those salaries are subject to the new tax.

Under the law, a business can deduct what it pays for health insurance for its employees from the total payroll tax.

For instance if an employer paid a worker $50,000 a year, his tax would be 0.7 times that amount, or $350. But if the employer chipped in $200 a month for health insurance premiums, that would total an annual $2,400. That would be deducted from the $50,000. That would reduce the tax liability to $333.