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October 1, 2014

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Judge rules sales tax applies to comped meals for gamblers at Caesars casinos

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Leila Navidi

The entrance to the Bacchanal Buffet at Caesars Palace on Tuesday, September 11, 2012.

A judge has ruled that Caesars Entertainment must pay the sales tax on complimentary meals it provides to high rollers and other gamblers.

But District Judge James T. Russell said the casino company does not owe any sales tax on the free meals given employees.

The split decision came after more than two hours of oral arguments Friday.

And the decision doesn’t mean this is the final word. There is a case pending in the Nevada Supreme Court and four in district courts and probably 10 others fighting their taxes.

Senior Deputy Attorney General Blake Doerr said this case involves more than $18 million in taxes. And Caesars has not yet paid the tax.

John Bartlett, an attorney for Station Casinos, Boyd Gaming and other companies except MGM Resorts, said this decision mirrors one by a Clark County district judge.

Judge Russell said the points given to frequent gamblers for free meals were a taxable exchange. But the employee meals were not a retail sale.

Norm Azevedo, attorney for Caesars, argued the total awards program was not an exchange of assets. He said the points cannot be sold outside the casino or sold for cash.

He said Caesars is being double taxed — first on the net tax imposed on gaming winnings and then on the free meals provided to players.

Doerr referred to a prior opinion of the Nevada Supreme Court that ruled the use tax could not be imposed on the meals given players. That decision, however, permitted the state to levy the sales tax, Doerr said.

After the hearing Doerr said about two-thirds of the disputed $18 million comes from complimentary meals and about one-third on meals for workers. A casino spokesman said the ratio varies from property to property and the tax liability may be 50-50.

Judge Russell said there were numerous businesses that provide meals for the workers to keep them in the plant but the taxation department is only going after the gambling clubs.

Last November, District Judge Gloria Sturman ruled that Boyd Gaming must pay the tax on the complimentary meals provided players. But she held that Boyd did not sell the meals to employees and this was not subject to the sales tax.

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