Nevada casinos, Tax Commission reach deal on comped meals

Nevada casinos, restaurants and resorts reached an agreement with the state Tuesday that, pending legislative approval, would bring an end to a yearslong battle over taxes on comped meals.

Businesses will drop their claims for refunds under the settlement, which state tax commissioners unanimously approved. Including accrued interest, those claims total $233 million.

As a concession, the state will stop taxing free meals for employees and patrons, such as those offered by casinos.

Lawmakers must add the free food to a list of tax exemptions for the deal to be final, according to the Department of Taxation.

“There is no bill yet,” tax department Executive Director Christopher Nielsen said after Tuesday’s meeting.

This year’s legislative session ends Monday. The Assembly or Senate could file an emergency bill to get it through before things wrap up.

Disagreement over use and sales taxes on comped meals has fueled debate as far back as 2000, Nielsen said, when some businesses filed refund claims and argued the food should be exempt from taxes.

The Tax Commission has continued to say the meals should be taxed at the rate of the price of the food to the business. In 2008, the Nevada Supreme Court struck down a use tax on free meals but didn’t resolve sales tax on the food.

Businesses say giveaway meals shouldn’t be taxed because there is no money exchanged for the food. The state has argued that comped meals should be taxed because they have a monetary value.

The tax department and Gov. Brian Sandoval backed the settlement as a way to head off potential payouts from state coffers. A pending case before the state Supreme Court, Boyd Gaming vs. the Department of Taxation, could result in the state being forced to refund as much as $233 million to the businesses.

“We just can’t predict the outcome of these cases with any certainty,” said Michon Martin, Sandoval’s general counsel. “The governor wants to make sure that we’re able to resolve that liability.”

Tax commissioners, who met in Reno and Henderson via video conference, talked about word changes Tuesday but said little about the agreement itself.

George Kelesis, a Las Vegas attorney who serves on the Tax Commission, wanted the agreement to explicitly state it will be null and void if the legislators don’t enact the new section of law.

“That language needs to be cleaned up,” said Kelesis, who made the motion to approve the agreement with wording changes.

About a half dozen representatives and attorneys from businesses and groups such as Golden Gaming, Tommy Rocker’s bar and grill and the Nevada Resort Association spoke in favor of the deal.

“This has been a matter of dispute for over a decade and certainly a matter of intense negotiation over the past few months,” said Pete Ernaut, president of R&R Partners, which represents the Resort Association. “I’m just happy we’re at a true settlement.”

Some businesses that reported non-gaming revenue would receive refunds in the form of credits to use toward future tax payments, according to the agreement. With interest, those refunds total about $3 million for taxes paid from 2000 to 2008.

Other businesses that have shut down since litigation started could receive a total of $4.5 million, pending approval from the Nevada Board of Examiners, the agreement said.