This is a rare but timely guest-blogger contribution, penned by renowned Las Vegas attorney Robert Nersesian, the top counsel representing players who run into legal problems involving casinos including (famously and on many occasions) James Grosjean. (For more of this, check James’ own guest contribution to Arnold Snyder’s now-defunct Blackjack Forum publication.)
Bob writes:
“This just popped up in my office from another attorney as an issue. For those of you who file Schedule C income on your gaming activities, it appears that the Prop. 3 gross-receipts tax will apply to all payouts received in the tax year in excess of one-million dollars. While I am not opining on the methodology of collection, the availability of discovery by the Nevada taxing authority, or the practicalities of implementation, clearly this effectively puts all professional gamblers at risk. Simply put, if you churn three million to win $150,000, it appears that there would be a tax owed to Nevada in an amount of over $60,000. It appears also to apply to non-Nevada Schedule C filers whose activities occur in Nevada. It also applies to a bad year where two million churned results in a loss of $10,000, and a tax liability just shy of $40,000, to be paid on top of the loss.”
Huntington Press will publish Bob’s second, presently untitled book next spring, a title which we can assure you in advance will be of great interest to the advantage-player world.
This is absolutely nothing to worry about. It all hinges on the definition of “revenue.” In the case of for-profit gambling entities, such as casinos or Schedule C professional gamblers, “revenue” is defined as the net proceeds from all gambling activities. (It is defined differently when goods or services are sold, but that is clearly not the case for a professional gambler or for the gambling portion of a hotel/casino entity.) Therefore, this tax, if enacted, would only concern an AP if he made over $1 million and even then, would only be on 70% of the total.. So make 1.5 million in a calendar year and you owe Nevada 21 grand. Big deal.
Also, that tax could be deducted from your total taxable income on your federal return, so if you were in the 38% tax bracket, that $ 21,000 would actually be more like $13,000. No panties need to be wetted over this; Bob Dancer is threatening to quit playing VP if Prop 3 passes, but it would be silly for him to do that, particularly as he states that his annual income from VP is considerably less than $1 million. Anybody who wants to avoid this tax could simply curtail his play when his profit for the year approached that threshold–a problem I would, personally, LOVE to have to deal with.
If you don’t believe me about the definition of revenue, ask yourself if CET or Stations is going to be forced to pay a 2% tax on the total of all the bets made in their casinos.