Nevada: Free Meals May Cost You
- Sales Tax News
- Nov 8, 2012 | Gail Cole
The city of Henderson, Nevada, is suing the state of Nevada and Station Casinos for the right to collect sales tax on certain complimentary and discounted meals.
On October 19, the Nevada Tax Commission ruled "that 'meals that involved guest opportunity comps, 2-for-1 coupons and promotional comps coupons' were not retail sales… ." Therefore, the taxes casinos had paid on those transactions should be refunded. The city of Henderson is challenging the decision and has filed a suit in Clark County District Court against the state Taxation Department, the Nevada Tax Commission, and Station Casinos on October 23. Station operates several casinos in Henderson. (VegasInc).
This is not the first time the taxability of complimentary and discounted meals in casinos has been called into question. Casinos paid a use tax on the meals until, in the 2008 case Sparks Nugget v. State, Department of Taxation, The Nevada Supreme Court determined that "the complimentary meals given to patrons and meals provided by the casino to its employees were not subject to use tax." Yet the Court added that "we do not foreclose the possibility that complimentary meals such as the ones at issue…may be subject to sales tax where consideration is properly demonstrated." For instance, consideration was properly demonstrated in the case of Boyd Gaming offering comped meals to employees.
The legal definition of consideration is: "Something of value to either the promisee or the promisor of a contract (usually cash, but also property, a promise to do something or not to do something, and so on) that is given or will be given by the promisee to the promisor in exchange for a performance or a promise of a performance by the promisor."
Henderson claims that the free and discounted meals were transferred for consideration and should therefore be subject to sales tax.
According to the Nevada Revised Statutes, a sale is "any transfer … in any manner or by any means whatsoever, of tangible personal property for a consideration." This includes "[t]he furnishing … for a consideration of food, meals, or drinks." (NRS 372.060(1 and 3c)). Sale price is "the total amount for which tangible property is sold, valued in money, whether paid in money or otherwise…" (NRS 372.065 (1)).
It is common practice for casinos to offer coupons and complimentary meals to players. If the court determines that these meals are, in fact, subject to sales tax, both city and state coffers would be considerably more full.