The Nevada Gaming Control Board (Board) has finalized its
changes to the state's Live Entertainment Tax (LET) assessed on
gaming licensees, as mandated by the Nevada Legislature. (We
originally reported on the Legislature's actions and the
Board's initial draft regulations in
our August newsletter.) With the adopted final draft, the Board
resolved some contentious issues.
In many ways, this new LET is simpler. Under the new LET structure,
all live entertainment events for which there is an admission
charge are taxed uniformly at a flat rate of 9 percent of the
admission charge to a venue where live entertainment is provided.
The tax is no longer imposed on amounts paid for food,
refreshments, or merchandise sold at the venue (unless the purchase
of such items is required as part of the price of admission), is
not imposed on amounts paid for access to tables, seats, lounge
chairs, or particular areas of a venue, and is not imposed on the
value of admissions provided to a patron on a complimentary basis.
The new LET applies to outdoor entertainment events (which were
formerly exempted), nonprofits that sell more than 7,500 tickets to
an event, and legal escort services (a new LET category).
The other exemptions found in the old LET remain largely the same
and include professional sports events if one of the teams playing
is domiciled in Nevada, Nevada college sports events, other school
events if only the students and teachers provide the entertainment,
boxing events, events at facilities with an occupancy of 200 or
fewer persons, and entertainment at trade shows, in shopping malls,
at organizations' private dinners or meetings, and roving
musicians.
Some issues, however, required additional discussion and
clarification following the initial Board draft. The Board has
addressed these in the final draft. One issue, for example, was a
question on how the LET will apply to luxury suites, boxes, or
similar products for venues with less than a 7,500-person
occupancy. The new LET does not include license or rental fees for
luxury suites, boxes, or similar products at facilities with a
maximum occupancy of at least 7,500 persons; however, the LET must
be paid for such license or rental fees for venues with less than a
7,500-person occupancy. The question was raised by a taxpayer
whether for these smaller venues they should continue to use
"historical practices" to calculate that admission charge
– which they submitted should be the number of luxury boxes
divided by the ticket price times the number of live events. In the
final draft, the Board has provided for flexibility to consider
such alternative methods of calculating the LET by adding in a new
subsection that provides that taxpayers may submit a written
request to the Chairman to obtain approval to use an alternative
method of calculating the tax under this section.
Another issue concerned events where admissions may be charged on
an ongoing basis but entertainment is provided for only a portion
of the time. The Board addressed these concerns by allowing venues
to dispute how the LET is applied to their event based on the
timing of when the admissions were paid and when the event begins
and concludes by submitting a written request to the Chairman to
obtain approval to use an alternative method to determine which
admission charges are subject to the tax.
Another key issue the Board resolved is which associated fees or
"service charges" are to be included in the LET. As noted
in our last article on this subject, 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. This debate centered on the definition of the term
"service charge" and what additional "service
charges" should be included in the tax – and
specifically whether Ticketmaster fees and other similar charges by
third parties who sell and issue tickets would be included in the
LET.
Taxpayers argued that service charges by Ticketmaster or other
third parties should be treated like credit/debit card fees and 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 as long as those charges
and services are optional and not required for admission to the
venue.
The Board addressed these concerns by clarifying that a
"service charge or any other fee or charge" means
"an amount imposed and received by, or on behalf of, a
taxpayer or operator for which the patron could not obtain
admission to the facility without its payment." Second, they
introduced two new definitions – for "ticket
broker" and "ticket service provider" – and
provide that a "service charge" does not include "an
amount imposed and retained by a ticket broker or a ticket service
provider."
One last concern that the Board clarified is the definition of
"performance." This has always been a subjective
definition, to which the Board has attempted to add clarity. As
discussed in
our previous article, one way the Board has done this is to
specifically define disc jockey performances and provide that they
are "performances" under the LET, whether or not the DJ
vocally addresses the crowd. The amended regulation also updates
the definition of "performance" which is the presentation
of an activity as set forth in NRS 368A.090(2)(a) that is the
"primary reason" for which a patron or patrons paid an
admission charge to access the facility. In considering whether the
activity was the "primary reason" for the payment of
admission, the Board has two factors they may consider:
- Whether the live entertainment activity is advertised, promoted, or otherwise marketed; and/or
- Whether the live entertainment activity garners the predominant attention of a patron or patrons at a facility.
If a potential taxpayer has any questions on whether the LET
will be applicable to their event or how it should be calculated,
the taxpayer may request an advisory opinion from the Board. The
Board may publish some of these advisory opinions if they find they
respond to general questions and can assist a number of taxpayers.
Such publication would be made in a way as to not disclose the
identity of the taxpayer who requested the opinion.
These new regulations are now in effect. Note that for non-gaming
licensees there are parallel regulations to implement SB267 that
are being worked on by the Nevada Department of Taxation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.