State gambling authorities in New Mexico have claimed that three Native American tribes owe them over $40m in casino revenue, in a dispute centering on the use of free play in casino slots.
Casino operators in the state regularly use the provision of free credits as a way of enticing patrons to play their slot machines. However if free credits are used by patrons who then lose their stake, the income is not reported in casino financial records for tax purposes.
New Mexico regulators contest that all casinos in the state should pay tax on every dollar of money earned from gamblers and therefore claim that the trio of tribes has not paid them due taxes on these free play wagers.
In 2015 the tribes signed a new compact agreement with the state of New Mexico, which at the time did not count free credits in the definition of taxable revenue, however this changed in April of this year when state regulators demanded payment for these free credits.
Officials estimate that Tesuque Pueblo owes about $3.2m, Sandia Pueblo $26.5m and Isleta Pueblo $10.3m. Other casinos operating in the state may also be liable to pay tax on free plays but no additional tax demands have been sent as yet.
The Tesuque, Sandia and Isleta pueblos claim that this is an illegal tax grab by government officials that violates federal law and have taken the state to court as a result.
A spokesperson for New Mexico’s state Governor, Susana Martinez told The New Mexican: “We simply believe in being accountable for state dollars.
“However, we have only been made aware of this lawsuit and cannot comment further.”
The state of New Mexico faces a potential budget shortfall of $70m ahead of the opening of its new fiscal year on 1 July following reduced yields from state oil refineries and has come under increasing pressure to balance its operating budget, prompting many to speculate whether this free play tax request is an attempt by officials to find the required funds.