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August 22, 2014

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New live entertainment tax kicks in

Immediately after Las Vegans rang in the New Year, nightclubs, strip clubs and other venues began ringing up charges for a new tax.

Nevada's new live entertainment tax took effect Thursday, making entertainment, drinks, food and merchandise at certain establishments more expensive for consumers.

Despite the new tax, patrons planning to see shows such as Bellagio's "O" or Bally's "Jubilee" won't notice a change in ticket prices because most casinos have been paying the tax.

"These properties have been paying the tax all along," said state Gaming Control Board Chairman Dennis Neilander. "What happened is that under the old law there was an exemption for outdoor activities and large showrooms."

Neilander said casinos already were paying a 10 percent casino tax for shows and venues with fewer than 2,750 seats. The new law does mean a new charge for casino-related shows with up to 7,500 seats, however. And for shows with 7,500 or more seats, the tax will be 5 percent.

The live entertainment tax was passed by the 2003 Legislature to reduce the state budget deficit and to close loopholes in the law that allowed casinos with large shows to be exempt from the previous tax.

Ticket prices at larger shows like Celine Dion's at Caesars Palace have already gone up to reflect the new tax.

Higher prices haven't hurt Dion's sales, said Robert Stewart, senior vice president of communications for Park Place Entertainment, the parent company of Caesars Palace.

"We restructured ticket prices back on Sept. 1 and I think that the prices did rise," Stewart said. "But she has sold out every show."

Patrons who frequent strip clubs or nightclubs with live dancers will feel the biggest sting.

Nightclubs featuring live dancers at clubs such as ICE Las Vegas could see the cover charge jump from $20 to $22. And drinks, which cost $10 on average, will also be taxed 10 percent.

Chris Wessling, controller of ICE Las Vegas LLC, said the club plans pass along the extra cost to customers.

"There's so much involved in sipping that martini and I've got to cover my cost on it all," Wessling said. "For us, we'll just have to pass it onto the consumer. I think it's going to irritate people when they find out about it."

Greg Zunino, a deputy attorney general who acts as an adviser for the Tax Commission, said the tax will capture revenue from the adult entertainment industry that has avoided such taxes in the past.

Olympic Gardens co-owner Pete Eliades said he won't likely raise the $20 admission price but will make up for the loss by upping the cost of drinks, which average about $7 now.

"We've got to do something to come even, otherwise you can't say in business," Eliades said.

Regular customers like Jim LoBue say the increase doesn't matter.

"Truthfully, it won't affect me," said LoBue, who said he spends $60 to $100 a week at Olympic Gardens. "If you enjoy something you come and you don't mind paying."

Missy, an exotic dancer at Olympic Gardens, said she doubts her tips will change.

"Usually when you have regular customers, they are dedicated to the place," said Missy, who did not give her last name. "It's like women and their nails."

Racing fans that frequent the Las Vegas Motor Speedway will see the smallest increase. Because of the large size of the arena, the cost of events will go up only 5 percent.

Speedway spokesman Jeff Motley said while most of the tickets for 2004 have been sold, fans who buy tickets at the gates will have to pay the new tax.

Enforcing the tax is another issue, though, Zunino said. Because many small venues could fall under the new live entertainment tax, the state won't likely be able to police all of them, he said.

"I can tell you the Department of Taxation does not have plans to send people out in the field to determine if they are paying or not," Zunino said. "I think that audits will probably have to come in the form of leads from competitors or patrons."

The other unknown factor connected with the tax is how much revenue it will bring in. Earlier this year, state budget officials estimated the tax would generate $117.5 million in 2004.

Zunino said that figure could change depending on how many businesses fall under the new rules.

"I think probably by the end of the quarter we can determine what kind of revenue we will get," Zunino said.

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