Tax decision challenged by Nevada county

Clark County's legal brief, filed Wednesday with the high court, followed one from Nevada lawmakers who said the March 27 ruling against taxes on free, or "comped," meals would have devastating fiscal consequences for the state -already facing a revenue shortfall nearing $1 billion.

Mary-Anne Miller, Clark County counsel, argued that Nevada's tax exemptions on food should be limited only to "that which is consumed by a household or other noncommercial use."

If the high court's decision stands, its "rippling effect" will add up to "a staggering sum and will cripple local governments at a time when they are least able to absorb such a blow," Miller said.

The result will be a "substantial hit on the revenue streams that will affect schools, roads, agencies of public safety and other government pursuits" that are of vital importance to voters, Miller added.

Miller supported the legislators' argument that a constitutional amendment approved by voters in the 1980s made food bought at grocery stores exempt from state taxes, but made clear that prepared food served in restaurants, including casino restaurants, was taxable.

The Supreme Court ruling "has opened the door for further mischief in that hotels and related businesses can be expected to attempt to broaden this exemption to avoid taxation in other ways that were never intended by the electorate," Miller said.

The Taxation Department has been collecting taxes on the free meals provided by casinos to patrons and employees for years. The Supreme Court ruling was made in a refund case brought by the Sparks Nugget.

Chief Deputy Attorney General Gina Session, who filed the Taxation Department's rehearing petition, said the high court applied the tax exemption at the point when food is purchased wholesale, and that means "the entire purchase" of all food and not just the part that ends up as a "comped" meal.

If the decision stands, Session said it would mean that food later cooked and sold in restaurants wouldn't be subject to the state's sales and use taxes -and that's "an absurd result and must be avoided." The "comped" meals are only a small part of the food served in restaurants.