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Tuesday, August 25, 2015

Updates to Nevada’s Live Entertainment Tax – Part 3

By Jennifer Gaynor, Greg Gemignani, Kate Lowenhar-Fisher and Jeff Silver

This is the final post in a series of blog posts about changes to Nevada’s Live Entertainment Tax.

“Service Charges”

Perhaps the biggest area of remaining debate is whether or not associated fees or “service charges” are to be included in the LET. The traditional payment of credit card or debit card fees to a financial institution that are unreturned to the venue remain clearly exempt under the revised law.

There is lively debate, however, on the definition of the term “service charge” and what additional “service charges” should and should not be included in the tax.

Senator Lipparelli, who sponsored the LET legislation (Senate Bill 266) in the Nevada Legislature, specifically stated in his testimony on April 7, 2015, in the Senate Committee on Revenue and Economic Development, that SB266 would add clarity to the “service charge” issue and that “service charges associated with the issuance of the ticket – to the extent that you hire someone to issue the tickets – have to be true charges paid out and not returned in any fashion.” This language suggest that Ticketmaster fees and other similar charges by third parties who sell and issue tickets would not be included in the LET, so long as the third-party vendor does not remit these charges back to the venue.

The current Board draft regulations, however, do not adopt the language that was suggested to clarify this issue in SB266. Instead, the draft continues to have language that may be unclear and, in fact, deletes the “service charge” exception to the LET that had previously been found in NRS 368A.

In the Board’s LET workshop on July 23, it was clear that there is ongoing disagreement on what should and should not be included in the LET as a “service charge.” Taxpayers argued that service charges by Ticketmaster or other third parties should be not taxed as part of the LET when that service charge is not remitted to the venue. They also argued that charges for additional services or amenities, such as special event parking or shuttles to the venue, should not be included in the LET, so long as those charges and services are optional and not required for admission to the venue.

The Board responded that “if the legislature wanted to keep the status quo [of not including such service charges in the LET], why would they delete the service charge exception?” They also commented that they do not want to risk operators “saying that the ticket price is $50 but $48 of this is for parking and only $2 is for admission.”

Several taxpayers objected to this and are submitting comments and proposals to amend the language to make it clear that what is being taxed is the admission to the facility, which should not include charges for other purposes, such as convenience fees for purchasing tickets online or having them shipped to the customer.

At this time, there is not another public LET workshop scheduled. The stated goal of the Board is to revise the regulations based on the hearings and any additional written comments they have received and to provide the revised draft for review by the Nevada Gaming Commission and then the Nevada Legislative Counsel Bureau, with the intent to have the new regulations promulgated by October 1, 2015.

The new law makes it clear that noncompliance with the collection and payment of the LET can be considered by the Board to be an unsuitable method of operation by a gaming licensee. The new law also provides for taxpayers to request an advisory opinion from the Board concerning matters relating to the LET.

The effective date of the law is October 1, 2015. The Board recently published a notice to explain how this will affect LET payments. This notice provides that if a taxpayer reports admission ticket sales on an accrual basis (i.e., advanced admission sales are reported in the month of the show/event rather than the month the sales occurred), it must report these sales on its September 2015 tax return or on an earlier month’s tax return. All admission charges reported beginning October 1, 2015, will be subject to the new 9% tax rate.