Free-Meals Tax Ruling Stands

CARSON CITY, Nev. (AP) - The Nevada Supreme Court says it won't
reconsider its ruling in a case that could lead to as much as $150 million in refunds in state and local taxes to casinos and restaurants.

The case involved a tax refund sought by the Sparks Nugget for
"comped" meals provided for free to employees and some patrons.
The state could be liable for as much as a third of the refund total. Local governments and school districts would be liable for the rest.

Ben Kieckhefer, spokesman for Gov. Jim Gibbons, said the state Taxation Department is reviewing its options with the attorney general's office as a result of the court order on Thursday.

"Obviously it's not how we wanted it to go," he said. "We'll have to wait and see what they come up with."

The state has already cut $1.2 billion from the current budget due to lower-than-expected tax revenues. The impact of the refunds has not been factored in to the state's finances yet.

The Sparks Nugget contended in its appeal that the complimentary meals it provides to its patrons and employees are exempted from sales and use taxes.

The court majority in the original opinion agreed, saying no taxable event occurred between the tax-free purchase of the food and when the casino gave the meals away. Meals that are sold are subject to the sales tax.

The state Department of Taxation asked the court to reconsider its decision. The Legislature also sought a rehearing.

In its decision Thursday, the Supreme Court said the arguments raised in the rehearing request were the same as before, and it "did not overlook, misapprehend or misapply the law" in its initial rejection of the case.

The ruling will have an ongoing impact on the state budget as the Department of Taxation processes the numerous requests from casinos and restaurants.

Dino DiCianno, executive director of the Nevada Department of Taxation, said requests for refunds flooded his agency after the initial decision. The ruling will means about a $1.3 million refund to the Sparks Nugget alone.

Some of the casinos have offered to take their refunds in phases. DiCianno said he would meet with the Nevada Tax Commission to determine the procedure.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

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