New tax law not clear on casino dancing

Friday, Oct. 24, 2003 | 10:58 a.m.

CARSON CITY -- The state Gaming Control Board is still having problems deciding whether increasingly popular dance clubs in casinos are going to be subject to the new 10 percent live-entertainment tax.

MGM MIRAGE officials believe the new law excludes some of these places from the tax that takes effect in January.

But Dennis Neilander, chairman of the Control Board, is not sure.

The new tax law is not clear, Neilander told the Nevada Gaming Commission on Thursday. He said the estimate of revenue from these nightclubs was figured into the state's budget.

Under the present casino entertainment tax, these casino nightclubs collected the 10 percent tax on admission and food and drink.

Neilander said the Legislature felt its new law still captured the present operation. He pointed to remarks by Sen. Randolph Townsend, R-Reno. During the final special session, Townsend said those places that are taxed now were to be included in the new law.

Under the old law, Neilander said, "If you had music and dancing together, it became taxable automatically anywhere in a gaming establishment."

He said there are gaming businesses that are taking the position that dancing is not live entertainment under the new law.

"If we lose that existing tax base, it will create a problem," he said.

Neilander said he did not know how much the state would lose, but he has his staff working on an estimate.

A draft proposal of the new regulation on the entertainment tax prepared by the Control Board was outlined for the Gaming Commission. It says that live entertainment that is subject to the tax includes dancing by patrons in casinos to recorded music.

An alternative, supported by the gaming industry, would exempt nightclubs where dancing occurs if the person presenting the music or spinning the records does not interact with the customers or is not advertised as a celebrity DJ.

If the disc jockey did not perform any visual entertainment, that would be exempt from taxation, the alternative proposal says.

Robert Faiss, attorney for MGM MIRAGE, presented a letter dated Oct. 17 to the commission favoring the alternative.

He suggested that no live entertainment tax should be charged where a person "by the push of a button or the turn of a dial on electronic equipment" plays the recorded music. "These 'music facilitators' have no substantial interaction with patrons, they do nothing that would constitute visual entertainment for patrons and their names are not advertised as an attraction for patrons," Faiss said.

Neilander said the casinos claim that "the person has to perform or there can't be any live entertainment" to which the tax applies.

"I don't dispute you can read it (the tax law) the way they are reading it," said Neilander. "I'm not advocating we do one or the other.

"I'm worried that we're going to create a revenue problem that (the Legislature) did not anticipate."

The practices in nightclubs vary. Some will have a DJ who is playing the music and taking requests from patrons. He may not do anything other than that.

In others the DJ performs or gets involved with the customers. Neilander says these nightclubs definitely fall under the tax guideline.

Nobody showed up at the commission hearing Thursday to present live testimony.

The commission will take another look at the proposed regulation next month and possibly approve it at the Las Vegas meeting.