Taxing comps

In 2008, the Nevada Supreme Court struck down a use tax on comped meals but left unresolved whether such meals are subject to the state sales tax. Since then, casinos have petitioned for refunds of those use taxes totaling hundreds of millions of dollars.

In January, the Nevada Tax Commission rejected an appeal by Boyd Gaming Corp. and said sales tax could be levied. That ruling upheld the findings of an administrative law judge, who said employee and complimentary meals were retail sales subject to tax. Court challenges are pending.

Officials with the Department of Taxation held a workshop Monday in Carson City on how to tax complimentary meals given to casino patrons and employees. If this session was supposed to clear everything up, they need to try again.

The department had planned to begin imposing sales tax on comped meals as of Feb. 15. But the agency is still trying to adopt regulations on how to collect those taxes.

Chris Nielsen, deputy taxation director, told those attending the workshop that meals provided as comps to gamblers belonging to casino club card programs – where the player must give personal information to join – would be subject to sales tax at the retail rate. For employee meals, on the other hand, the sales tax would be based on the cost of the specific food to the employer.

Opponents said the draft language was vague. Would sales tax also apply to coupon freebies where no such loyalty club affiliation exists? What about partial comps, where a patron uses reward points?

Tax agency officials were unable to answer many of these questions. And there are plenty. How far do the bean-counters plan to take this? Will we soon hear cocktail waitresses saying, “Here’s your complimentary cocktail, sir. But I’ll need to collect 28 cents for the sales tax”?

John Bartlett, a Nevada Resort Association attorney, said the agency’s move to adopt new regulations was premature, urging that the process be delayed until legal challenges are resolved. That sounds like a good idea.