The Pennsylvania Supreme Court, in a decision that could have far-reaching effects for casinos in the state, has held that the Parx Casino in Bensalem does not have pay tax on the value of prizes given away in monthly promotions.
The decision validates the deduction of the cost of prizes given away by the casino in 2006 and 2007—mainly cars—as promotional expenses, exempt from the state’s 55 percent gaming tax. Legal experts say the precedent should apply to prizes given away by all 12 Pennsylvania casinos.
The court agreed with Parx attorneys that the prizes met the state gaming law’s definition of a comp exclusion, and could thus be deducted as a promotional expense. The state’s attorneys had argued that the prizes were not directly related to slot machine play and therefore could not be deducted.
“We conclude that the legislature’s inclusion of the comp exclusion is indicative of an intent to allow gaming facilities to subtract amounts, such as the promotional awards, without requiring these sums to be tied to the play of a specific slot machine at a specific time,” Justice Max Baer wrote for the majority in the 6-1 decision, which overturns a 2009 Commonwealth Court ruling. “Accordingly, we reverse the order of the Commonwealth Court.”
Justice Ronald Castille was the sole dissenting judge. “Marketing and promotional expenses are simply a cost of doing business i.e., business expenses, for casinos,” Castille wrote in his dissent. “The unintended effect of the majority opinion will be to encourage increased casino giveaways, subsidized by the taxpayers.”
While the opinion will affect all the casinos, the amount it will reduce revenue to the state is relatively small. For Parx, the decision will refund roughly $300,000 in promotional expense, compared to $200 million the casino pays annually in revenue taxes.
