Nevada weighing options in business tax case

Chris Rizo Aug. 5, 2008, 1:50pm

Catherine Cortez Masto (D)

SEATTLE, Wash. (Legal Newsline)- Nevada Officials are still deciding how best to respond to a recent state Supreme Court decision that could cost the state millions in tax collections, state Attorney General Catherine Cortez Masto said Tuesday.

Masto, a Democrat, had urged the state high court to reconsider its 6-1 ruling that food provided for free to casino patrons and some employees is tax exempt, but the justices denied the request.

The "potential fiscal impact of this decision could be devastating to the state," she said, urging the court to reconsider its ruling in favor of John Ascuaga's Nugget, a casino resort in Sparks, Nev.

On Tuesday, she told Legal Newsline that she and other officials are considering whether a next step should be made by the state.

"We're taking a look at our options right now," said Masto, who is in Seattle to attend the Conference of Western Attorneys General.

In the case, John Ascuaga's Nugget sought a $1.3 million refund from the state for taxes it paid on complimentary meals between April 1999 and February 2002.

Observers have said the ruling could cost the Silver State $100 million in revenue at a time when the state is grappling with a budget shortfall that is expected to reach $900 million by mid-2009.

Masto said Tuesday that regardless of the state's financial health, the court erred in siding with the mega-casino.

"It changed how we've done business for years," she said of the court's ruling.

To help balance the books, Republican Gov. Jim Gibbons in January ordered a 4.5 percent across-the-board budget reduction, and that cut was to help bridge the gap without taking into account claims by the Nugget and other casinos.

The court's majority opinion, signed by Chief Justice Mark Gibbons and five other justices, said "no taxable event occurred when the Nugget provided complimentary meals to its patrons and employees."

The ruling also said the state constitution exempts most "food for human consumption" from both sales and use taxes.

"Whether this exemption is the best approach is not for us to decide," the justices wrote. "We are bound to follow the constitution's plain language even though a different result might be desirable in some circumstances."

Justice Michael Douglas dissented, arguing that the state Legislature intended the tax exemption to apply to the purchase of food for preparation and consumption at home, not meals provided free of charge or otherwise by a restaurant.

"Thus Nevada law unequivocally requires a tax to be paid on meals that are provided free of charge to patrons and employees," Douglas wrote.

From Legal Newsline: Reach reporter Chris Rizo at

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