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Nevada Tax Commission Rules Comped Meals are Taxable


The Nevada Tax Commission denied Boyd Gaming Corporation's appeal for a refund of use tax it paid on complimentary meals given to patrons and employees at 12 of its Casinos. The decision has far reaching implications. Every casino in Nevada has a similar appeal in front of the Commission, and if the Commission rules the same way in most of those cases, hundreds of millions of dollars will stay with the state. 

Boyd Gaming began filing for refunds in 2004 for use tax paid by many of its casinos on food purchased for complimentary patron and employee meals. The casinos offered complimentary meals to patrons as part of exchange systems called "player's clubs," in which patrons exchange personal information and information about their gaming activity for points they can turn into rewards (such as "free" meals). The casinos also offered one complimentary meal per shift to each employee.

In 2008, the Nevada Supreme Court denied Boyd's refund requests for use tax paid on food for the meals for the periods January 1, 2000 through June 30, 2008. Finally, Boyd Gaming appealed to the Tax Commission, and the matter came for hearing on January 23, 2012.

The Commission denied Boyd's appeal on the grounds that the complimentary meals were in fact retail sales, which are subject to sales and use tax. According to NRS 372.060, "A sale is defined as the transfer of tangible personal property for a consideration." The Commission states that a "consideration" does not have to be money, but is "...simply an exchange of things of value or which provide a benefit."

According to the Tax Commission, the patrons exchanged information for rewards, which ultimately became meals. As for the employee meals, the Commission states "...the meals were a result of a bargained-for employment contract...the exchange involved a meal on the part of the Taxpayers [the casinos] and labor on the part of the employees," [emphasis added]. Conclusion: 1) the meals are retail sales, 2) the casinos did not collect sales tax on the meals, so 3) Boyd Gaming is on the hook for the use tax.

Attorney John Bartlett, who represents Boyd Gaming, says that Boyd will file a suit in the District Court. But for now, the Nevada Tax Commision's ruling reinforces the maxim, nothing is free.

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.