Wacky Tax Wednesday

A recent road trip landed me in Las Vegas, where I saw an amazing show. Le Rêve, at the Wynn Theatre, presents a magical world in which performers plunge into a deep pool and soar to the rafters, defying gravity with apparent ease. I was transported to a dreamlike state by the music, lights, dripping water and agile dancing acrobats.

Upon awakening, I found myself wondering about the tax implications of entertainment in Las Vegas, Nevada. After all, various forms of entertainment in the city draw visitors by the thousands, and those visitors surely contribute to Nevada’s tax revenue. I wanted to know more.

Live entertainment tax

It turns out that Nevada imposes a live entertainment tax on “any activity provided for pleasure, enjoyment, recreation, relaxation, diversion or other similar purpose by a person or persons who are physically present when providing an activity to a patron or group of patrons who are physically present.”

According to the Nevada Department of Taxation, “Live Entertainment status commences when any patron is required to pay an admission charge before he is allowed to enter a facility, where there will be live entertainment, regardless of when the live entertainment starts. An admission charge includes an entertainment fee, a cover charge, a table reservation fee, or a required minimum purchase of food or merchandise.”

Live entertainment includes but is not limited to the following activities:

  • “Music or vocals provided by one or more professional or amateur musicians or vocalists.”
  • “Dancing performed by one or more professional or amateur dancers or performers.”
  • “Acrobats or stunts provided by one or more professional or amateur acrobats, performers or stunt persons.”
  • “Athletic or sporting contests, events or exhibitions provided by one or more professional or amateur athletes or performers.”

To make the game of taxation more interesting, different rules apply to live entertainment in a licensed gaming establishment and live entertainment in a non-gaming establishment. The Nevada Department of Taxation administers the live entertainment tax for non-gaming establishments, and the Nevada Gaming Control Board administers the live entertainment tax for gaming establishments.

Not only do different rules apply to entertainment in different venues, rates differ based on the number of seats in the venue. For a venue with a seating capacity between 200 and 7,499, the live entertainment tax rate is 10%. The rate for admissions to a venue with 7,500 seats or more is 5%; however, even in these larger venues the live entertainment tax rate for other charges (such as merchandise and prepared food and drinks) is 10%.

Tax administration feels more and more of a gamble in Vegas. There’s the elevator ride fee, which may or may not be subject to the live entertainment tax. And there’s the fact that for “gaming licensees who have at least 51 slot machines or at least 6 tables,”

Live entertainment status begins at the earlier of when the live entertainment starts or when the admission charge is imposed. It would therefore be possible for some venues to be in live entertainment status even before the admission is charged… (Nevada Gaming Commission).

My big night out

The Wynn Theatre, home to Le Rêve, is in the Wynn Hotel and Casino, which is a licensed gaming establishment. It has 1608 seats. During my big night out, I paid the 10% live entertainment tax both on the cost of the ticket and on the snacks and drinks we purchased prior to the show. I also paid sales tax on the cost of the food and drinks; and in Nevada, sales tax “applies in the retail sales of beer, wine, and liquor to the entire amount charged for the product, including the amount of all other state and federal taxes imposed on the product.”

The Wynn Theatre will remit the live entertainment tax revenue to the Nevada Gaming Control Board. However, it will remit the sales tax to the Nevada Department of Taxation.

If you think that sounds wacky, you’re not alone. Several Gentlemen’s clubs have taken the Nevada Department of Taxation to court, challenging the constitutionality of Nevada’s live entertainment tax. Last fall, the Nevada Supreme Court affirmed the district court summary judgment rejecting the facial challenge to its constitutionality, and this month, the United States Supreme Court denied the clubs’ petition for a writ of certiorari.

photo credit: Le Reve: The Stage via photopin (license)