One of New Orleans’ most popular casinos has been in a tax dispute with the state of Louisiana for months. Harrah’s New Orleans believes they are exempt from paying taxes on rooms they comp to casino patrons. The state feels differently.
A judicial court judge has ruled that Harrah’s must pay taxes on these comped rooms. It’s a tough blow for Harrah’s, which hasn’t paid these taxes since 2001. Let’s take a look at what this ruling really means.
Harrah’s New Orleans Tax Rates, Explained
There aren’t many legal gambling options inside New Orleans. For years, Harrah’s Hotel and Casino has been the only venue offering table games here. In fact, it’s the only privately-run casino in the entire state. There are, however, a number of online casinos in Louisiana.
Harrah’s New Orleans receives long-term licenses from the state in exchange for paying taxes. This hotel pays a 9% tax rate on all hotel room stays. The casino pays the state 21.5% on its gross gaming revenue.
Not long ago, this popular gambling establishment struck a new 30-year license extension to operate in Louisiana. As a part of this deal, Harrah’s will invest $325 in property upgrades. A brand new 340-room hotel tower will also be constructed.
Over the next three years, Harrah’s will pay the state of Louisiana $19.5 million in new taxes. It will also pay an annual fee of $3.4 million in licensing extension fees. In total, the state is guaranteed at least $60 million in gambling and hotel taxes every single year.
Tax Dispute Between Harrah’s and the State
Things seemed to be moving forward fine for this gaming venue. Unfortunately, a lawsuit broke out between Caesars Entertainment, which operates Harrah’s, and Louisiana. The case stems all the way back to 2001 when Harrah’s began comping casino patrons with free rooms inside the hotel.
At this time, Caesars Entertainment had not taken control over Harrah’s. The casino was struggling to generate revenue and the hotel was failing to bring in guests. Officials in Louisiana agreed to an annual fee drop. This hotel and casino’s annual fee to the state lowered from $100 million to $60 million.
Unfortunately, the state did not make a ruling on taxes for comped rooms. As part of a strategy to attract new casino gamblers, Harrah’s New Orleans began offering rooms in its hotel for free. As we mentioned earlier, each room at the hotel is taxed at 9%.
Caesars Entertainment argues that rooms given out for free should not be taxed. State government officials believe Harrah’s owes the state millions in unpaid tax fees. The exact figures are unknown. It’s estimated to be somewhere between $30 and $50 million.
Judge Sides With the State
Judicial Court Judge William Morvant has officially agreed with the state in this lawsuit. According to Morvant, Harrah’s New Orleans should be paying the hotel taxes on comped rooms. He argues that the state tax laws are clear, and the hotel-casino needs to pay the state what it’s owed.
“There’s nothing vague and nothing ambiguous about this,” Morvant said.
Another court trial will take place in September. It appears the verdict is already established. Now, the state will need to determine exactly how much money is owed. These taxes will be paid to the Superdome Commission. Exactly what they go towards is unknown.
Once the trial is complete, Harrah’s will need to begin paying taxes on all comped rooms. This includes the rooms inside the future hotel tower being constructed.
Caesars, which recently merged with Eldorado Resorts, may be forced to dish out millions to Louisiana. With months until the next trial, the company may have time to convince the courts otherwise.