Nevada AG to ask state Supreme Court to reconsider tax ruling

By Chris Rizo | Apr 9, 2008

Catherine Cortez Masto

CARSON CITY-Nevada Attorney General Catherine Cortez Masto is expected to ask the state Supreme Court to reconsider its recent ruling that food provided for free to casino patrons and some employees is exempt from the state sales and use taxes.

"We are facing a $900 million shortfall without taking into consideration this ruling," Ben Kieckhefer, press secretary to Gov. Jim Gibbons, told Legal Newsline.

The Republican governor has been working with Masto on how best to respond to the ruling. The governor wants to be sure that "all legal options remain on table," Kieckhefer said Wednesday.

In a 6-1 ruling last month, the high court sided with John Ascuaga's Nugget, a casino resort in Sparks, which sought a tax refund from the state that the casino paid on complimentary, or so-called "comped" meals, for a period between April 1999 and February 2002.

The casino is requesting a $1.3 million refund from the state, which is confronting a budget shortfall expected to reach $900 million by mid-2009.

To help make ends meet, Gibbons ordered a 4.5 percent budget reduction in January.

The attorney general's office and legislative leaders said that the court's ruling could dig the Silver State's budget hole even deeper, especially if other casinos seek refunds for taxes paid on complimentary meals.

The 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.

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