Legislation sanctifying a deal over taxing complimentary meals moved quickly out of the Assembly committee after a brief hearing Saturday.
If the worst-case scenario for the state happens, Assembly Bill 506 would save the state $233 million that the Department of Taxation would have to pay casinos, restaurants and other establishments demanding back sales and use taxes paid in years past on comps given to patrons and employees.
Taxation Director Chris Nielsen said the Tax Commission last week approved a settlement eliminating the two cases before the Nevada Supreme Court and canceling that debt.
In return, the Legislature has to pass AB506, which declares those meals and non-alcoholic beverages non-taxable going forward.
“This contingent liability has been hanging over the state for years,” Nielsen said. “There are huge litigation risks for both sides, state and local governments, the casino industry and restaurant industry.”
Without the legislation, he said, everything depends on how the Supreme Court rules in those two cases.
“The worst-case scenario, the state and locals would literally have to write a check for $233 million,” Nielsen said.
He said the best-case scenario would be a ruling that both patron and employee meals are subject to the sales tax, which would generate up to $4 million a year in revenue moving forward.
Pete Ernaut, representing the major resorts, told the joint Senate and Assembly hearing that both sides faced equal risk because of the uncertainty over how the high court might rule.
“There is an old saying in this building, that if both sides are relatively unhappy leaving the table, it’s probably a good deal,” he said. “And I can tell you we’re unhappy.”
The Assembly Commerce and Labor members voted without comment to recommend passage of AB506. When it reaches the Senate side today, the same action is expected.