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The French Market Buffet inside Boyd Gaming’s Orleans resort. The Nevada Tax Commission ruled Monday that casinos must pay sales tax on comped meals given to gamblers.
Sunday, Aug. 14, 2011 | 2 a.m.
Related Stories
- State: Casinos owe tens of millions for comps (8-10-2011)
- Lawmakers ignore comped-meals tax issue, its $210M implication (5-1-2011)
- Gamers’ prospects looking good on comped-meal tax issue (6-27-2008)
- Governor says he wants to close $150 million loophole (6-27-2008)
- Gaming industry opposes tax provision (6-27-2008)
Last week, the state saw the tip of the proverbial iceberg.
With Nevada government scraping to stay in the black, a recent Tax Department audit concluded Boyd Gaming Corp. owes $20 million in unpaid taxes and interest, according to a company filing with the Securities and Exchange Commission.
The company disagrees. Boyd argues that, in fact, it is the state that owes the company about that amount in taxes it wrongfully paid on comped meals from 2000 to 2008.
At issue is whether casinos should be taxed on the food they give away — whether to employees in their lunchrooms or to gamblers to entice them to linger at the slots and tables.
Because this affects any Nevada casino that offers such comps, Boyd’s situation offers just an inkling of what the industry could owe the state. A similar audit of Caesars Entertainment is confidential, according to the state Tax Department, but the amount large casino companies would owe if the state wins this dispute is much higher than the $20 million the state claims Boyd owes.
Meanwhile, casino companies are trying to reclaim $210 million they say the state wrongfully collected because of shifting legal opinions.
“The stakes for both sides are very high,” said Carole Vilardo, president of the Nevada Taxpayers Association. If casino companies win, the state would have to pay refunds “which would be very difficult in this economy.” But if the state wins, casinos would have to pay a much higher sales tax based on the retail value of the food versus the wholesale value.
The comped-food battle will test the will of Gov. Brian Sandoval and lawmakers to tangle with the state’s most powerful industry. In 2008, gaming lobbyists successfully killed legislation that would have settled the matter.
In Nevada, food is exempt from the sales and use tax unless it is prepared for immediate consumption; you pay sales tax on a sandwich at a restaurant, but not on bread you buy at the store.
For decades, casinos paid a “use tax” on the food, calculated on the company’s cost of preparing the meal. But the Sparks Nugget, also called John Ascuaga’s Nugget, said it shouldn’t pay the tax at all. In 2008, the Nevada Supreme Court handed a victory to the Nugget.
More than 100 casinos figured they should get tax refunds totaling about $210 million. And many casinos, citing the ruling, stopped paying taxes on comped meals.
Gov. Jim Gibbons’ administration, pummeled by deep budget deficits, played hardball. Rather than refund the money, the Taxation Department decided to collect sales tax on the meals, putting forward a new legal argument that the meals are provided to patrons and casino employees as “consideration” — either to encourage gambler loyalty or as part of an employee’s compensation package. That amount is calculated on the full retail price of the meals, a much higher number than the old way of calculating the tax.
It was an argument that the Supreme Court seemed to invite. The court stated in a footnote to its ruling, “we do not foreclose the possibility that complimentary meals such as the ones at issue … may be subject to sales tax where consideration is properly demonstrated.”
Indeed, Administrative Law Judge Dena James Smith has ruled, in a case involving Boyd Gaming, that casinos should pay sales tax on the meals they comp gamblers. “The complimentary meals were directly in exchange for information and a certain amount of gambling,” she wrote. But she ruled that employee meals were not subject to any tax.
The Taxation Department, Boyd and Caesars are appealing the judge’s ruling to the Nevada Tax Commission — the tax man being upset by the ruling and the casinos wanting their refunds.
In Nevada, the pledge of "No new taxes" to "starve the Beast" appears to really mean "kill the geese that lay the golden eggs."
This is stupid on the part of the state. Despite the fact that this tax has been collected in the past and since ruled against, leaving it owing those monies back to those same businesses, they are risking the killing of their chief source of income.
We have all witnessed most of the houses going through bankruptcy, reorganization and some just closing altogether. Many are still going through this and most are still in recovery. No one is healthy yet. Investors are still behind and wary of staying.
So, what does the state do? The state says hey, these folks are in difficult financial peril and close to the edge. Lets see what we can do to push them over.
On top of everything that has happened, on top of a home mortgage crises that is the worst in the nation, on top of still having the highest unemployment in the nation, on top of everything that is bad in Nevada and despite the fact that the gambling houses are the main source of income and employment in the valley and the state; the state would risk causing some to default on their obligations, push them deeper into debt and risk it all.
Yep, that sounds like solid prudent thinking, much like those that want to punish the employers, tax payers and earners. Where will the state get it's revenues if these houses lay off workers agains, some close down and others default on tax payments? This is what you call very narrow thinking with a lack of the complete landscape. And just when the sun is beginning to rise.
One doesn't blow up the whole damn just because of a leak. Especially when the existence of that leak is uncertain based upon it's own experts.
I would really like to see the math on this... public officials in this state have a really solid history of being very good at doing the odds but terrible at doing the math.
At some point you keep taxing the casinos to the point where they can't be generous to anybody and they die. I play less than I used to mainly because the comps no longer came close to compensating for any of my losses. But the offer of a free meal and a bed can still cost me a small fortune. The money I then lose provides jobs and pays taxes. Make it to where it costs the casino a bunch of extra tax money to give ten dollars worth or food away that might retail for forty five dollars and they quit giving the food away. And then you have less gamblers, less revenue, less jobs and the belt-tightening continues and the downward spiral won't stop. Some state like Texas will then come along and make it to where the casinos aren't taxed to death so they can use profit to comp customers and treat employees better. It'll start out small and then blossom. Then Nevada politicians will blame everybody but themselves. I give it about twenty years.
It's a farce that taxes are lower here in Nevada than other states. I have a $600 car registration "tax" bill to prove it..among other charges that the state finds a way to impose for the "loss" of state income tax.
The problem, in the first place, is the Supreme Court decision. How that food is not taxable as prepared food is beyond ludicrous.
Just another example of why elected supreme court judges (in other words paid for judges) is a horrible idea.
Attempting to justify theft is the workings of the criminal -- all forms of public-theft are immoral and must be abolished.
FACT: There are no larger thieves of private/personal property than government entities.
Imagine no taxation -- I wonder if you can -- no greed to steal -- the earnings of your fellow man -- imagine all the sheeple owning what they've earned -- you may say I am a dreamer, but I am not the only one -- I hope someday you'll join us -- where the ungoverned thrive alone.
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Problem is, two very different issues (food comps for gaming guests versus employees' shift meals) are being lumped into the same taxation category. I don't claim to know the answer to the conundrum of the former, but I DO believe that assigning full retail value to casino workers' meals for taxation purposes will create disaster on every level, for all involved.
Do our desperate, short-sighted law-makers REALLY want to tax our plates of food that badly? Full Retail Value (lol!) for what some would call... well, let's just say it's convenient nutrition that keeps workers ON PROPERTY during our shifts.
TomD1228 it is not the state that you paid high DMV registration. Check your bill it is a special tax created by Clark County as a special tax for roads and the money only goes to Clark County. This was done years ago for county roads ONLY not freeways which is fed and state money. Many times this has been addressed but Woodbury who was in charge at the time saw no reason to remove. Instead of attacking the state maybe you should watch what you vote for locally. I have been in this state for 42 years and watch everyone move here say finally lower taxes but they just let little things get thru. As for the casino's don't ever think they are poor. This state has let them pay a 6% gaming tax since the early 70's and never increase but everywhere else in this COUNTRY and CHINA they pay either 12% New Jersey or 29 to 58 percent rest of states and china gaming tax pluse paying sales tax on comp's. They created there on problem with the so call playing cards. Maybe it be a little nice if they break up all the big owners like Boyd, MGM and Stations. When companies have too much control of an industry they think they can control the people like paying the tax they know that is on the books and no one will say anything because everyone is believing in this trickle down theory. Weed a few out then you will have a better stable economy second they should have never allowed wall street into the casinos. Been the down fall of my home for 42 years. I saw it coming but no one would listen because it was all about money (profit) whereas individual owners where about business and keeping employees because that brought back more visitors (making people happy even they lost a bundle of money) Like the old man Sam Boyd believed. He is rolling in the grave for what his son (Bill Boyd) has done to his private business turned wall street business.
Now maybe people will understand how business unfriendly our bureaucracies have become that a private company cannot even give somithing away for free without the taxman getting a cut!
They should be taxing shadetree and the other food banks and shelters too then! Or at least issuing 1099's with their meals.
No good deed goes unpunished!
Disagree. The only way most players can get a comp is by gambling, and gambling is taxed. Maybe we need to eliminate the word comp and change it to "free".
Sales tax is based on the amount of money exchanged for a product. No money changes hands when I give you something for free.
Maybe I am missing something, but where is the sales tax created in a free exchange?
The patron is enriched but not the merchant. In fact the patron should include the value of the meal as income on his tax return if you really want to talk taxes.
The 6 casinos in Pa. pay more in taxes to the state than the 260 casinos in Nevada. There is something vastly wrong with this picture. The casinos have far too much power in this state.
We need to have a state lottery to pay for education like other states, yet it will never pass here because of the casino's and their lobbying efforts.
The casinos had better pay up. Our "politicians" need a lot more money to waste. This will be a good start.
Finally the government is taxing these big corporations who make millions and billions of profit and pay their CEO's millions of dollars. And let's not forget their corporate jets that they all use to bring their fat cat millionaire gamblers to town to get free comps that are not taxed. I'm for the poor worker that changes the bed sheets and cleans the toilets of these fat cat millionaires and billionaires. There the ones that can't even afford the 3.50 a gallon gas to fill their 92 Chebby on their 18K per year earnings. How can they do this when they have to send half their paycheck back to their family in Juarez? It's just not fair. I hear there is a rally next Saturday in front of Harrah's led by some of my hero's like Richard Trumpka, Al Sharpton, Harry Reid, Hugo Chavez, and Javier Bacera. It's going to be a great day. I can't wait to attend. We'll show these casino scum millionaires and billionaires who's the boss.
Just a couple of questions:
Do the casinos include the value of the meals on their employees' W-2's (and withhold and pay the required FICA, Medicare, federal withholding,etc.)? Do the various police officers who go the the casino employee cafeterias to get their free meals receive a 1009 tax form for the value of those meals?
So would this new tax also apply to all the free drinks you get at the tables and slot machines. I think Nevada could get out of the red with all these new taxes. Of course, all the casinos would go bankrupt and put everyone out of work. If your going to tax the meals you have to tax the drinks!
tbvegas makes an excellent point. Is Three Square and Catholic Charities next on the list to be taxed?
Every Christmas day I take my family and drive around Las Vegas giving coffee and donuts to the homeless, is the IRS coming after me next?
My friends bought me dinner last weekend in San Francisco, do they owe taxes on that now?
Where does it end?
We should all thank Harry Reid for this. He destroyed the mafias because they didn't pay enough taxes and now he wants to destroy the big corporations. Just like Obama, Reid's philosphy is the rich, private jet traveling corporations like MGM, Boyd, Wynn, etc should be taxed to death. This will lead to the end of this city. Congrats to everyone that voted for Reid and hence lead to the complete destruction of Las Vegas (ie tax to death city). Meanwhile, Obama and Reid spend billions every MONTH on their private jet rides -- all on the public dime!
When I use a 2 for one coupon, or a 20% off coupon, they tax the ampunt I actually pay. So is tax "owed" by someone (the house or the customer) for the difference between full retail and the discounted value?
Here in California, they do calculate rebates on new cars after tax, so the tax is collected on the rebate amount.
The Casinos simply need change their status to Church. Nobody wins anyway so they are all donations technically. Nobody wins either so it not even gambling.
@vegasfun,,,,do u realise that Mormom money built Las Vegas,,,thats why Harry Reid is our candiadate? Imz tired of the good ole boy Mormon connection here. Remember we can trace the Mormon roots back some 140 yrs ago and not gib a sh% t,,,
"At issue is whether casinos should be taxed on the food they give away -- whether to employees in their lunchrooms or to gamblers to entice them to linger at the slots and tables"
I wouldn't consider employees meals as a comp meal, but instead, look at it as part of the benefits offered by the hotel to their employees. Most of the food offered to employees anyway, are usually the over made extra's coming off of the hotels buffets and from elsewhere within the hotel. Why throw it away as most food establishments would have required, just give it to the employees.
I feel the state is looking at all options to scrape up a few bucks, but this I must say is beyond ridiculous and only shows how this state will do anything in its power to help balance the budget by going way overboard in their assessment of this matter.
The Boyd establishment has always taken care of their "Hawaii" clientele base and local visitors alike. Now, the state's out to get them for all that they've done right to maintain loyalty from their customers.
Being from Hawaii, we already have to pay a hefty round trip airfare over to Las Vegas, and Boyd has made it much easier for Hawaii's citizens to travel there by offering us these comp meals and rooms as an incentive. Does the state of Nevada wish to diminish its ties with our local residents who frequently travel to Vegas? Your Hawaii visitors bring in much income to Las Vegas due to the fact that Hawaii does not offer gambling. It would be a huge mistake on their part, should the state of Nevada decide to start taxing comp meals.