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Friday, March 12, 2010 | 2:01 a.m.
Harrah’s has sued Nevada, seeking the refund of $10 million in taxes the gaming giant paid on four corporate jets.
The legal action is the latest in a series of attempts by large Nevada corporations to take back hundreds of millions of dollars in taxes paid to the state. Lawmakers fear that if Harrah’s succeeds, it would prompt others to pursue similar tax refunds, adding to a state budget shortfall already expected to top $3 billion by the time the 2011 Legislature convenes.
Harrah’s argues it should not have paid tax on the aircraft it purchased in 2006 because the planes’ first flights were to locations outside Nevada and during the first 12 months of operation, they were used for interstate commerce — ferrying corporate executives and casino patrons around the country and globe.
If the company prevails, it would get back the $8.5 million it paid in taxes, plus interest.
An administrative hearing officer and the Nevada Tax Commission rejected the company’s argument late last year. Harrah’s appealed, filing a complaint in District Court in Clark County. A hearing in the case is scheduled for this month.
The tax-related legal actions by corporations — arguing for tax exemptions on everything from imported coal to comped meals at casinos — come as the state has struggled to balance its spending and revenue through four rounds of budget cuts, beginning in January 2008.
The case also comes at an awkward time for the gaming industry.
Nevada’s largest industry fought legislators’ request last month to pay $32.5 million in additional fees to cover the cost of regulating gaming. The industry successfully argued that the fees would hurt a struggling business that pays almost half of state government’s costs.
Marybel Batjer, a vice president of public policy for Harrah’s, said the tax appeal is strictly a legal matter and not a reflection of the company’s or industry’s attitude toward Nevada.
“I think we are very good citizens for Nevada. We have our international headquarters here. We work hard for the state of Nevada,” she said. The industry is “the major tax provider in the state — Harrah’s is a huge portion of that. This is a legal issue, not an issue of fairness. This is not whether we participate well in the revenue of Nevada.”
Harrah’s is the latest in a series of cases that lawmakers are watching to see how they affect the state’s budget.
• In a case pending before the Nevada Supreme Court, Southern California Edison has argued that coal purchased out of state should not have been taxed. NV Energy has requested a rebate. The companies have asked that tens of millions of dollars in taxes be returned.
• Casino companies have sought hundreds of millions of dollars in refunds on taxes paid on meals comped to guests and employees. The Nevada Supreme Court ruled in favor of a Northern Nevada casino in 2008. Other casino companies followed suit, and the state is challenging the copycat cases.
• The state is still calculating the price tag that casinos and other developers received for building certified “green buildings” under legislation passed in 2005 and 2007.
Sen. Randolph Townsend, R-Reno, said these actions, combined with pension liabilities, create an additional budget shortfall as large as $500 million. He predicted that if the state has to refund the taxes on Harrah’s corporate planes, other companies will pursue similar refunds.
Nevada Sen. Randolph Townsend, R-Reno, speaks on the floor in the Senate chambers at the Legislature in Carson City.
“If this is $10 million for Harrah’s, this will be a significant number for other companies” with planes, Townsend said.
Assemblyman Tick Segerblom, D-Las Vegas, compared the case to an individual who bought a car in Oregon and brought it to Nevada.
“The state would be all over you to pay taxes,” he said. In purchasing the plane, “it seems the intent was to bring guests to casinos in Las Vegas. It seems disingenuous to argue the plane was intended for anything else.”
Segerblom called the Supreme Court decision on comped meals “frankly, one of the worst decisions in the history of Nevada.” That ruling “seems to have opened the floodgates” for corporations to seek to recoup millions in taxes from the state.
In the Harrah’s case, an attorney for the company argued that a 1999 law provides an exemption for planes, buses and other property not intended for “storage, use or other consumption in this state,” according to a transcript of a July Tax Commission hearing. The law says property is exempt if:
• it was first used in interstate or foreign commerce outside Nevada;
• it is used continuously for interstate or foreign commerce, but not exclusively in the state for the first 12 months of its use.
The first plane Harrah’s bought, for $35 million, flew from Oregon to Arkansas, before heading to Long Beach, Calif., to be refurbished. After that it flew to Las Vegas. The three other planes were delivered to Harrah’s in Arkansas, and some made stops in California before heading to Las Vegas, Harrah’s attorney John Bartlett said.
Bartlett also noted that Harrah’s Operating Company, a subsidiary of the parent corporation, is a Delaware-based corporation.
The Tax Commission unanimously ruled against Harrah’s.
“When you purchase a $35 million aircraft and all you have to do, rather than fly it to Nevada ... you fly to Billings, Mont., or anywhere but Nevada — shazam — you don’t have to pay the use-tax,” said Tax Commissioner Hank Vogler, according to the transcript. “I can hardly believe that the Legislature had that intention.”
Deputy Attorney General David Pope told the commission that the 1999 law was intended to clarify what property is subject to sales or use tax, so there would be no confusion over whether commercial passenger planes that land in Nevada or tour buses that stop here should be taxed. He also argued there is substantial connection between Harrah’s planes and Nevada.
“Harrah’s is registered to do business in Nevada, it’s believed its headquarters are in Nevada and if not, at least they have a very nice building and substantial business operations in Nevada,” Pope said. “The planes were purchased for use in Nevada ... The planes fly in and out of Nevada as evidenced by the flight logs.”
No other state has collected a tax on the plane, and no other state is trying to, he said.
is stevem the attorney for harrah's.
The states argument seems to be we cannot afford to give you your money back? They don't really argue the interstate commerce laws are applicable, just that they want the money.
Strange. It seems government thinks all money is theirs and they are being nice when they let you keep some of it.
Give them their money back. They will spend it wiser than the state will. The state will flush it down the toilet.
For years and years these Casino companies have pulled the wool over the faces of Nevada politicians as they have argued their case of " we expand into other jurisdictions so we can bring money back and spend it here." Over the last decade Vegas has become less and less important to these companies and now SHIZAM Nevada has no influence over these corporate greed driven companies or the gaming industry. These companies have been calling the shots in Nevada for to long its time to stand up for ourselves like the other states with gambling do. Gambling companies in this state pay less than half the taxes here than they do in other states and countries with gaming. BE FAIR TO NEVADA! NOT CHINA
I Have Done The Same Thing With My Cars For Years And Also Use One More That Would Help Them A Lot. You Would Think They Would Have People In Place To Keep From Paying Out Money They Don't Need Too. I Haven't Paid Sales Tax On My Cars For Years. They Make The Laws I Just Use Them.
The state has already flushed it down the toilet
Not one red cent should be returned to Harrahs. They own and operate their business here in Nevada, and the state is entitled to this tax money. We the people of this state need these funds, and Harrahs has a responsibility to the people of the State of Nevada, not just their own corporate greed and turning their backs on the state that made them what they are today.
That money could help alot of laid off workers.
They should try taxing the casino's earnings at the same rate they tax MY earnings!
neiman has came with more stupidity today. Interstate commerce has nothing to do with this argumnet. Neiman is a pathological socoiopath with a delusional thought processes as witnessed by most of his illogical rants. The planes were cleary purchsed by a Nevada corporation for use by that corporation at their whim in or out of Nevada but yet for that Nevada corporations use. Because they first flew and landed jet in California is red herring. This is a perfect example of how bad of a citizen Harrahs really is and their claims of contributing to state of Nevada are disingenuous at best. Of course just how many times has Harrahs Corporation been charged and found guilty of crimes in Nevada? Harrahs is a renegade corporation who has brought shame and ill repute to gaming and Nevada over the last few years.
When a person beats the system by purchasing a vechile in another state and claiming to have paid far less than they actually paid or better yet a realative gave it to them to avoid sales tax it is illegal. Yes it is done and it is wrong.
Anyone who believes that tip earners are not paying taxes has not followed the events of the last ten years and the agreements made between the IRS and casinos.
Interstate commerce! Would someone please commit neiman to an institution? Of course if Bush or Ensign would have said it was wrong neiman would be ranting another song.
In most states the gaming tax paid by casinos is around 25% or more yet Nevada casinos pay around 6%. And in the last month Jan Jones the corporate nit wit for Harrahs was saying the gaming industry would not pay any more to help with Nevadas deficits. I wonder what this failed ex mayors bonus will be with Harrahs as Nevadans make sacrifices to make ends meet?
Everybody's gotta know that Gary Loveman hates the Nevada Gaming Board/Commission. He would much rather petition Macau for another license so Harrahs can build its $2 billion casino next to the golf course it already owns there. Oh, OF COURSE, he doesn't mind paying Macau 39.5% in gaming taxes. But Nevada, lets screw Nevada.
If a company based in Nevada purchases a plane it is subject to use taxes, and any person who thinks thats incorrect is just trying to cheat the system. Shame on Harrah's. Do they think they do not have to pay their fair share??? Gimme a break.
OH by the way the 10 mil Harrahs wants to back out on is 1/10 of what Gary Loveman pays himself yearly. Employees and customers have already felt the brunt of his greed who's next?
Those who pay no taxes honestly know what the government is worth.
Hey Homer, a couple of your "facts" are wrong.
Harrah's is a DELAWARE corporation, not a NEVADA corporation.
Harrah's does business in LOTS of other states besides Nevada. According to your logic, they should pay use tax on those jets in EVERY state they do business in.
Suppose you had a business (ha) with outlets in multiple states. Suppose again that you used a jet to fly between those outlets. Would you want to pay a multi-million dollar use tax in every state you have an outlet in for that jet?
If you say yes, you're a big fibber.
All you other people, why aren't you beating up on NV Energy, or any of the other companies that want rebates? To me, this is just another grab by a corrupt state government on companies that provide employment (and payroll taxes!!) to thousands of people.
Remember, you keep socking it to the companies, they're going to go somewhere else where the business climate isn't trying to pick their pockets every day.
'nuff said
That argument about the tax difference between Nevada and other states is old and moldy.
Let's look at a simple fact.
How many casinos are in Nevada?
How may casinos are in, let's say, Illinois? (BTW, Illinois has one of the highest casino tax rates in the nation.)
OK, ready? Now, anyone with some sort of logic circuit should be able to understand why the casino tax rate is lower here in Nevada. We have LOTS more casinos paying the tax.
In Illinois, we have FEWER casinos paying the tax.
Now, even though it's hard, let's think like people who are TRYING to RUN A BUSINESS. You raise taxes from a LOW percentage to a HIGH percentage on one type of business, some of those businesses are going to shut down.
So, instead of INCREASING your tax base, all you've done is SHRINK your tax base.
Now, I know some of you will say, "Oh (insert casino you hate the most here) has so much money, they can afford to pay more taxes!"
So, that means, if your business starts to be really successful, the state can raise the taxes on your business to0, right?
What we need is a broader tax base, not a narrower one. Raising taxes on ONE type of business, which happens to be the biggest employer in the state, will do nothing but narrow the tax base.
What happened the last time our state legislature raised taxes? We still ended up with a $800 MILLION DOLLAR DEFICIT!
So much for raising taxes being the cure-all for everything.
'nuff said
By "Going Somewhere Else" I meant that they could shut down their operation, reduce the size of their operation, or otherwise modify their operation to reduce the increased tax liability.
"Going somewhere else" was a simple metaphor. I'll try not to be so obtuse next time I post.
Thanks for pointing that out to me friend Gordon.
Also makes me wonder how much tax the mining companies pay on all that giga-million $$ equipment they buy and bring in and will eventually abandon here. I'm sure they legislated in a loophole somewhere, sometime.
Could you imagine if Howard Hughes was alive today? What would the progressives think of him? I'm sure they'd think he was a ruthless capitalist who enjoyed tormenting his wage slaves extracting evil profits and keeping virtually every dollar for himself while his employees were left to eat dirt sandwiches and be happy about it.
You know all those evil profits and wages those people keep are subject to taxes. And the people who make that kind of money are the ones who are paying 95% of the tax burden supporting the ENTIRE country. You might want to treat the hand that feeds you with a little more kindness.
They should try taxing the casino's earnings at the same rate they tax MY earnings!
Nevada has no income tax, try again honey.
Gordon, I think it's called diversification. By branching out into those other regions, even with their extreme tax rates, it allows the business to not depend on Nevada for their continued revenue stream.
Also, I think something can also be said for being the only game in town? That's the reason for the push into Macau, simple profitability. Instead of having to fly them from China, we can pick their pockets right in their own backyard.
I seem to remember reading somewhere that Harrah's, even with the rank-smelling economy, is doing better than casino companies who aren't as widely distributed as they are.
Anyway, excellent train of thought friend Gordon.
'nuff said
I think you're all full of it.
The reason why Macau can charge a 39% tax rate is because there are only 6 concessions in Macau and a guarantee that the gov't will regulate expansion of the market. Oh, and the fact that 1 billion people live right across the boarder with a genetic disposition for gambling!
Nevada (and AC) dropped the ball, not controlling the number of casino licenses and overall development throughout the state, even as other states (CA/PA) expanded gaming.
Having a very low tax rate makes/made sense, as the industry was growing, as it attracted significant investment to the region. Look at Singapore, very low tax rate by comparison and two of the most expensive casinos in the world.
Raise the tax rate today and you will see property redevelopment stop on a dime in Nevada. Note that in the past, Vegas has been able to reinvent itself. Raise taxes and that will never happen. You will also see overall visitation decline as casinos will no longer have the capital or the willingness to bring high $$ players into the Las Vegas market. You will kill the industry or at the very least, set the ball in motion for a continued decline in visitation.
yetis, well said. I agree with you 100%.
You know, the sign of someone's intelligence is how much they agree with your point of view. From where I sit, you must be highly intelligent!
People seem to think that they can wave the magic "raise taxes" wand and all us business people will bend over and take the shaft, just for the benefit of doing business here in Nevada.
Meanwhile, our legislature continues to spend money like a drunken sailor on shore leave, and gets upset when ONE SECTOR of business in the state doesn't fall over themselves to accept a raise in taxes and a loss in revenue.
Hey, if we need to raise taxes so badly, why don't all you tax and spend folks out there vote for a personal income tax. They'll surely bring in LOTS of money for our state political masters to spend on all those glorious social programs.
'nuff said
Tick Segerblom.... "I never saw a tax I didn't like"
Screw Harrahs, I hope the State raises the gaming tax to 20%.
I hope there are no Delaware lawyers reading the new article. The fact does not allow the planes to be tax free just because the planes were used to fly around cor-pot-e gaming execs and their party dolls and their party drugs. The use of the air for designer drugs is a matter for the FBI not for the legislation to determine whether
those who used the planes for transportation to get lite like a June bug should be tax exempt while the planes were flying and while the engines were running from one casino to another casino registered to Harrahs gaming certificate numbers.
Filthy Scum! I hate casinos. They are hiring the best lobbyists to pay as little as possible, forcing the little guy to fork over more money for services and now the bastards are trying to get loopholes to further minimize their already meager offerings to the state?
Time for Nevada to put in a lottery system see how
how the casino like that
Time for NV to legalize marijuana and tax it just like alcohol. They should have been taxing online gambling for the last 10 years. I advise VOTING out everyone that is in office.
Loveman's gold chariots are tax deductible!! Who says the emperor is naked?