Caesars takes case of use tax to Nevada Supreme Court

When Caesars Entertainment Corp. built up its air force by purchasing four private jets in 2006, it expected a refund of the $8.6 million use tax the next year.

Four rejections later, and the amount having risen to about $12 million with interest, the Strip heavyweight took its case to the Nevada Supreme Court on Tuesday. Whether it succeeds hinges on how the three-judge panel defines the first use of each plane and their continuous use during the first year of ownership.

At one point, senior deputy attorney general David Pope conceded that the state Department of Taxation’s reading of the law in opposing Caesars led to “an absurd result.” This came in response to a question from Justice Ron Parraguirre asked whether an empty flight from Las Vegas, where the planes are based, to Memphis, Tenn., to pick up someone to go to Washington, D.C., would violate a provision that requires continuous use in interstate commerce for 12 months in order to avoid the tax.

A number of the flights had no one or nothing on board.

“For some reason, the Legislature wanted to limit this definition to requiring passengers or property,” he said. Because the law was written with airliners or tour buses in mind, he said, people or cargo are supposed to pay for their transportation to qualify as interstate commerce.

Likewise, the example posed by Justice James Hardesty of carrying Jack Daniels from the Kentucky distillery would not meet the test.

Of the four jets, costing a combined $112 million, two carried company executives on business and the flight logs for the other two listed executives and guests as passengers, according to court documents.

This year’s Caesars Entertainment proxy statement said the company’s planes are used primarily for business trips, but Chairman and CEO Gary Loveman took personal or commuting trips valued at $536,000.

“For security reasons, Mr. Loveman is required to use our aircraft for personal and business travel,” according to the regulatory filing.

Caesars attorney John Bartlett argued that no dispute existed that the planes were used in the first year for carrying out interstate commerce, even if the passenger did not buy tickets, on trips across the country and overseas.

“These aircraft are not being used simply to service (Caesars’) business locations in Nevada,” he wrote.

The Caesars picked up the planes in either Portland, Ore., or Little Rock, Ark., meeting one part of the exemption that they be delivered outside the state.

One plane stopped in Santa Rosa, Calif., on its maiden Caesars flight, another went for refurbishment in Long Beach, Calif., and the other two came straight to McCarran International Airport. Because all of the flights began somewhere else, Bartlett said they complied with the exemption requirement of the first use taking place outside the state.

Since Las Vegas was always the destination, Pope countered, the first use involved Nevada and validated keeping the tax.

Companies pay the use tax for personal property upon purchase, then apply for a refund a year later if they can prove they deserve an exemption. Caesars, however, was turned down by the Department of Revenue in 2007, followed by rejections on appeal to an administrative law judge, the Nevada Tax Commission and Clark County District Court.

The planes were originally titled to Harrah’s Operating Co., since renamed Caesars Entertainment Operating Co. and a subsidiary of the main company.

Contact reporter Tim O’Reiley at or at 702-387-5290.


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