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courts state���s budget and future tax structure may come down to a ���$350 million coin flip��� By David McGrath Schwartz���staff writer CARSON CITY ��� For decades, Nevada casinos paid a tax on the meals they ���comped��� patrons and employees ��� the Las Vegas tradition of pit bosses doling out steak dinners to blackjack players, or more recently, slot jockeys cashing in their reward points. But gaming, Nevada���s largest and most influential industry, is pushing for an agreement with Gov. Brian Sandoval and lawmakers to exempt complimentary casino meals from taxes in future years, according to gaming lobbyists, state officials and lawmakers. The stakes of the negotiations are big, representing a potential budget-busting hole of as much as $350 million in the state���s spending plan. A lawsuit on the matter, Boyd Gaming Corp. v. the State of Nevada, is pending before the Nevada Supreme Court. ��� Lynn Warne, president of the If the court rules for caNevada State Education Associasinos, the state could be tion, on a court settlement that forced to pay back to cawould halt taxes on comps sinos an estimated $230 million to $350 million for taxes it collected on the meals in the 2000s. To settle that lawsuit before the court issues an opinion, the industry is offering to forgive the potential $350 million rebate in back taxes in exchange for the state agreeing not to tax future meals. Not taxing future meals would mean forgoing millions of dollars that otherwise could go to education, public safety and social services. So far, Sandoval and his administration have remained firm that the meals are subject to taxes. Sources said there was a tense meeting at the governor���s office last summer in an effort to settle the issue. ���Both sides think they have strong legal cases,��� said one source with knowledge of the case, not authorized to speak on the record because it���s part of ongoing litigation. ���It comes down to whether the state and industry want to do a $350 million coin flip.��� Currently, no casino is paying the tax on comped meals, a state tax official said last month in a legislative committee meeting. The casinos point to a 2008 Nevada Supreme Court ruling that the state owed a rebate to the Sparks Nugget, which spurred the rest of the state���s casinos, big and small, to seek tax rebates. The gaming industry wants the situation to be resolved soon. ���We���re hopeful we can find a solution that is amenable to both the state and the industry,��� said Pete Ernaut, president of R&R ���That would dig a deeper hole. It leaves Nevada that much further behind being able to support kids and schools.��� | 4 MARCH 2013 20130304_VI07_F.indd 7 | Partners, whose clients include the Nevada Resort Association. One lobbyist for gaming, speaking on the condition of anonymity, said there is likely to be a bill before the 2013 Legislature. Meanwhile, the Sandoval administration is pressing forward on rules that would allow the state to once again collect the tax. Sandoval���s chief of staff, Gerald Gardner, declined to comment for this story, citing ongoing litigation. So did Christopher Nielsen, director of the state Department of Taxation. Advocates for education and state services say Nevada can���t afford to exempt those meals from taxation. ���That would dig a deeper hole,��� said Lynn Warne, president of the Nevada State Education Association. ���It leaves Nevada that much further behind being able to support kids and schools.��� Court rules, rebate requests flow The dispute and potential hole have been hanging over the state since 2008. That���s when the Nevada Supreme Court first ruled in the industry���s favor, saying the ���use tax��� the state had been charging casinos since at least the 1960s for comped meals didn���t apply. Although the case dealt only with the relatively small Sparks Nugget, it set off a feeding frenzy of claims for tax rebates. But the Supreme Court decision, in a footnote, said the state could argue that it could impose the alternative ���sales tax��� on comped meals when it could prove ���consideration��� was given for the meals. Consideration means the state could prove casinos received something of value in return for the meals. The sales tax would be higher because it would be calculated on the retail price of the meal instead of on the cost of ingredients to prepare the food, as it had been calculated previously. see coin flip, page 13 shutterstock.com 7 2/28/13 2:34:21 PM