Legislators Take on the Taxing Logic of Nevada’s Live Entertainment Tax

April 03, 2015

You’re waiting to be seated at a Las Vegas restaurant and wondering if you’ll be able to be able to hear the live jazz performance from your table. Perhaps you should also be asking yourself whether you’re going to be paying the live entertainment tax for that privilege. That might seem like a simple question; in reality, it’s anything but.

Nevada imposes a live entertainment tax (LET) on admissions charges and food, beverages, and merchandise purchased at an event featuring live entertainment. So if your restaurant features “music or vocals provided by one or more professional or amateur musicians or vocalists,” you can expect to have a 10 percent LET tacked onto your bill.

Unless, of course, the music “does not routinely rise to the volume that interferes with casual conversation” and “would not generally cause patrons to watch as well as listen,” or if the music consists of un-advertised “occasional performances” by employees who are not primarily entertainers, or if the restaurant is in a licensed gaming establishment and the bandstand is located in a licensed gaming area. And naturally, the tax is also inapplicable “as long as the performers stroll continuously throughout the facility” (if the establishment has a gaming license) or “move constantly through the audience” (if it doesn’t).

So no confusion there.

Earlier, I said the LET was a 10 percent tax, and that’s right—for a restaurant. But if the venue has a maximum occupancy of 7,500 or more, the tax rate drops to 5 percent and only applies to admissions charges, not to other purchases (food, beverages, and merchandise).

Now let’s move out of Las Vegas and over to the Black Rock Desert, home of the annual Burning Man festival, a multi-day live entertainment event—and one that is exempted from the Live Entertainment Tax, along with NASCAR and the Electric Daisy Carnival. The latter still has Tier 1 tickets available for a mere $748.80, and you don’t have to worry about them tacking on the LET.

But maybe you’re in the state for a trade show in Reno. More good news! Live entertainment at trade shows is exempt from the tax. The entertainment at boxing matches is in the clear, too (though there are separate taxes on boxing matches)—but wrestling is another story. And remember, if you want to avoid the tax at a gaming establishment, be sure to check how many slot machines and games the establishment is licensed for, as that can make all the difference.

To Nevada Assembly Minority Leader Marilyn Kirkpatrick (D), all of this sounds hopelessly complex and likely to lead to substantial tax arbitrage activity. As such, she has proposed replacing the LET with an admissions tax, the so-called Luxury Discretionary Spending Tax with a broader base and a unified rate of 8 percent exclusively on admissions charges. Rodeos, music festivals, races, boxing matches, and other forms of entertainment with admissions or cover charges would have the admissions fee subject to tax, though food, beverages, and merchandise would no longer be double-taxed as they are now, under both sales taxes and the LET.

In the other chamber, Senator Mark Lipparelli (R) has introduced similar legislation proposing the same unified 8 percent rate and seeking to address perceived uncertainty as to how the replacement tax would apply to gaming facilities. He has stated that his intent is a revenue-neutral replacement. Fiscal notes issued by the Nevada Department of Taxation to date decline to provide a revenue estimate for either the Kirkpatrick or Lipparelli bills.

These proposals exist largely outside of the larger debate in Nevada regarding new tax revenues. To the extent that modifications to, or replacements of, the LET are revenue neutral, they certainly have the potential to promote greater simplicity and neutrality in the tax code.

But of course, some entities will still try to find ways to avoid the tax: Burning Man, despite admissions charges in the hundreds of dollars, recently reorganized as a nonprofit.

Our recent analysis of the proposed Business License Fee overhaul is available here. More on Nevada here.

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