Gaming Commission supports new tax for casino nightclubs

By Liz Benston (contact)

Friday, Nov. 21, 2003 | 10:56 a.m.

The Nevada Gaming Commission on Thursday sided with its sister agency, the state Gaming Control Board, in supporting draft regulations that would require casinos to pay a 10 percent live entertainment tax on nightclub and lounge venues where disc jockeys play recorded music.

Casinos already pay entertainment taxes on their nightclubs -- costs that are typically passed on to customers. But whether they should pay taxes under a replacement entertainment tax approved by the Legislature in July and set for implementation Jan. 1 has been hotly debated in recent weeks.

"This is not a position on whether dancing (in nightclubs) is taxable," Nevada Gaming Commission Chairman Peter Bernhard said before the vote. The commission aims to be "consistent with the purpose of the bill" authorizing the entertainment tax, he said.

The Gaming Control Board, which is expected to vote on the live entertainment tax plan Dec. 4, has based its interpretation in part on a statement made at the close of the Legislature's marathon special session by Sen. Randolph Townsend, R-Reno, who helped draft the tax plan. Townsend said events currently taxed by the Control Board and state Taxation Department would continue to be taxed under the new regulations.

But an alternative tax plan proposed by the state Taxation Department and supported by casinos would exclude some nightclubs now paying a tax. Under that plan, an entertainment tax would not apply to nightclubs where disc jockeys simply play recorded music and don't otherwise "perform" for customers. The Taxation Department is expected to recommend that proposal to the Nevada Tax Commission, which has the final word on the regulations and will vote on the plan Tuesday.

A final public hearing involving both the Gaming Control Board and the Tax Commission is planned for today.

Unlike other regulations that cover gaming licensees, the Nevada Gaming Commission doesn't have a vote in the process. The Legislature has charged the state Gaming Control Board with giving input to the Tax Commission, which has been charged with interpreting the definition of live entertainment subject to taxation.

The Gaming Control Board would then use that interpretation to adopt its own version of the regulations, which would apply only to gaming licensees. The board is expected to vote on the live entertainment tax at its next monthly meeting Dec. 4.

Thursday, Control Board Chairman Dennis Neilander reiterated his concern that the state could lose an estimated $4 million in potential taxes if nightclubs are excluded from the new live entertainment tax.

The state's budget forecast includes that money because it counted on still receiving taxes from events that are taxed under the old plan, Neilander told the Gaming Commission.

The state also counted on growth over the years in nightclub venues subject to tax, he said.

The entertainment tax was originally conceived to capture some of the larger, nongaming entertainment venues not being taxed as well as adult clubs, which haven't been paying their "fair share" of taxes, said Sen. Townsend, who testified before the Gaming Commission Thursday. If casino nightclubs managed to escape the tax it wouldn't make much difference in funds to the state in the long run, he said.

Some of the Gaming Control Board's budget comes from the state's general fund, where casino entertainment taxes will ultimately go to fund various state agencies. But the board is more concerned about its regulatory duty than losing any potential funding, board member Scott Scherer said.

"We want to make sure the Legislature's intent is carried out," Scherer said.

A good faith reading of the law supports the board's position that venues in which "a person is providing the music or entertainment" are taxable, he said.

The Gaming Control Board doesn't have the authority to override the Tax Commission's interpretation but could try to expand on that interpretation and appeal to the Nevada Legislative Commission, Scherer said.

The legislative commission is made up of members from both houses that reviews all regulations to make sure they don't conflict with state laws.