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September 21, 2014

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Final piece in comped meals settlement is approved

Updated Tuesday, Aug. 13, 2013 | 5 p.m.

CARSON CITY — A state board Tuesday approved the final piece of a settlement to end a decade-long legal fight over taxation of free meals provided by casinos to patrons and employees, wiping away a potential multimillion-dollar taxpayer liability.

The Board of Examiners authorized $4.5 million in payments to casinos that paid the tax but are no longer in business.

"This settles the matter unless a future legislature changes the law," said state Budget Director Jeff Mohlenkamp.

State lawmakers this year approved a bill, AB506, inking an agreement that absolves the state of a potential $233 million liability.

The issue had been winding through the legal system since 2003 when a Sparks casino sued, arguing it shouldn't be required to pay a tax on comped meals. In 2008, the Nevada Supreme Court struck down imposing a use tax on free meals but left unresolved the question of whether such meals are subject to sales tax.

Other casinos also filed for refunds and lower courts issued conflicted rulings, sending the issue back to the high court. State Taxation Director Chris Nielsen said about half the claims sought refunds for taxes paid on free employee meals, while the other half was for comped meals given to patrons.

State officials feared an unfavorable ruling would drain state coffers with accruing interest.

"I'm absolutely pleased to get this off the books," Mohlenkamp said, adding that if the court ordered the state to issue refunds, "We'd be calling a special session."

Under the bill approved by lawmakers and signed by Republican Gov. Brian Sandoval, the state agreed not to tax free meals in the future. In exchange the casinos agreed to withdraw claims for refunds.

Nielsen said besides $4.5 million in direct payments, the Nevada Tax Commission earlier approved $3.1 million in tax credits to other establishments that had paid the levy erroneously.

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