The Nevada Supreme Court has refused to reconsider its ruling exempting complimentary casino meals from taxation.
State Taxation Director Dino Dicianno said that means the state and local governments will have to refund upwards of $150 million to casinos in taxes they paid.
The original ruling was issued in March and overturned long-standing rules requiring casinos to pay a sales tax on complimentary meals given to employees and guests at
the Sparks Nugget.
The Nugget and other casinos had been paying the tax for more than two decades.
But six of the seven members of the court agreed with attorneys for the Nugget that the free food was exempt because "no taxable event occurred when the Nugget provided complimentary meals to its patrons and employees."
The only dissent was from Justice Michael Douglas who argued the Legislature intended the exemption to cover purchases of food for preparation and consumption at home, not meals provided by a restaurant.
He said the majority was creating a loophole in Nevada's sales tax law.
The state asked the court to reconsider but the majority refused, stating the Nugget doesn't owe sales tax on its restaurant meals but, instead, collects the tax owed by the customer.
"Thus, while the food remains exempt from the Nugget's standpoint, the food, once prepared and sold, is subject to sales tax, which is paid by the purchaser of the prepared food intended for immediate consumption."
The court's original opinion stated that, since the customer or employee didn't pay anything for the complimentary meal, no tax is owed.
Dicianno said up to 70 percent of the $150 million in refunds will come from local governments and schools. The state's share of the sales tax is 2 percent.
But, he said, the state will also have to make up the loss suffered by the school districts in refunding the 2.25 percent Local School Support Tax.
The total amount of the refunds is limited by the statute that only allows casinos to seek refunds for the past two years worth of taxes paid.
Dicianno said the Legislature can apply the tax to those "comp" meals if it chooses to in the 2009 session.
- Contact reporter Geoff Dornan at gdor
nan@nevadaappeal.com or 687-8750.