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April 21, 2014

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State back at drawing board on comp meals tax but says casinos must pay

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Christopher DeVargas

A view of the newly renovated Buffet at the Stratosphere on Thursday, April 5, 2012.

CARSON CITY - The Nevada Taxation Department is going back to the drawing board to rework a regulation imposing a sales tax on complimentary meals that casinos give to players.

The rewriting of the regulation won't postpone the tax, which took effect Feb. 14 and will continue to accrue on casino's comped meals and the free meals given to workers.

The tax is expected to yield millions of dollars for the state if it withstands a legal challenge.

John Bartlett, attorney for the Nevada Resort Association, said during a public hearing by the taxation department that it is "premature and you should wait for the outcome of the litigation" before imposing the tax. Bartlett said the issue would probably end up before the Nevada Supreme Court.

Andrew Kahn, attorney for the 50,000 member bartenders and culinary union, said the regulation is contrary to the law in imposing the sales tax on food given employees of businesses. He also urged the department to wait until the legal dispute is ended.

And about 15 other people raised objections to the wording or posed questions about the regulation.

Chris Nielsen, deputy director of the taxation department, said the agency would consider all the changes suggested and that another public hearing would be held. But he made it clear that the tax could start accruing as of Feb. 14 even if there was no permanent regulation. The department however has given businesses until June 30 to remit the taxes due.

The regulation says that the tax on comp meals should be assessed against the retail price on the menu. The tax on free meals for workers should be based on the cost of the food when purchased.

Kahn objected to the levying of the tax on the cost of the food given to workers. He said employees are served the food that is old. For instance, he said, a restaurant may buy a fresh sirloin steak for customers. If it's not sold after several days, it is ground up into meat balls for workers, he said.

There were questions about imposing the tax if a customer comes into casino or restaurant with a coupon to pay for all or part of the cost of the meal.

Norm Azevedo representing Caesars Entertainment says he has a card from Starbucks and twice a year he gets a free drink. Is the tax paid on that, he wondered.

Is the tax imposed on an employer who offers free coffee to his workers, one speaker asked. Another asked if a jewelry store that provides free bottled water to customers to draw them during the summer months is liable for the sales tax.

The proposed regulation applies to a business that supplies complimentary meals to its patrons in exchange for taking part in a marketing program. And this must be considered a sale subject to the tax, according to the rule.

Any regulation adopted by the taxation department must be approved by the Nevada Tax Commission and then the Legislative Commission.

CORRECTION: This story was updated to correct information about the legal challenge to the tax. | (April 23, 2012)

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  1. It must gall the unions no end that they have to side with the casinos on this one. :)

  2. I am torn on this one. On the one hand, I can see comped meals being taxed, but at the actual cost of the meal, as these are meals that would have been prepared anyway. As for employee meals, I see it as the cost of doing business, as long as there is no charge to the employees. If the business makes money, then they should be taxed; if they feed them gratis, then is ridiculous to attempt to tax it. And if that is the case, then other facilities (US Government specifically - DOE NLV, Yucca Mt.) that have an Employee Dining Room that supplies food to staff, also should be taxed by the state.

  3. How about Travel Comps, Room Comps, Entertainment Comps and the list goes on and on. Why just not call it Marketing and give them a Fair Tax of 12% on Gross Sales.