MINUTES OF MEETING
ASSEMBLY COMMITTEE ON TAXATION
Sixty-seventh Session
May 27, 1993
The Assembly Committee on Taxation was called to order by Chairman Robert E. Price at 1:54 p.m., Thursday, May 27, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Robert E. Price, Chairman
Mrs. Myrna T. Williams, Vice Chairman
Mr. Rick C. Bennett
Mr. Peter G. Ernaut
Mr. Ken L. Haller
Mrs. Joan A. Lambert
Mr. John W. Marvel
Mr. Roy Neighbors
Mr. John B. Regan
Mr. Michael A. Schneider
Mr. Larry L. Spitler
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Alvin James, Chairman, Pyramid Lake Paiute Tribal Council
Sheri Vidovich, Tax Appraiser, Pyramid Lake Paiute Tribe
Carla Molino, resident of Pyramid Lake, private business owner and member of the Pyramid Lake Tax Commission
David L. Standing Bear, Tax Commissioner for Pyramid Lake Indian Tribe
Carole Vilardo, Nevada Taxpayers Association
Helen A. Foley, representing the 7-Eleven Franchise Owners Association
Bonnie James, representing the Las Vegas Chamber of Commerce
John P. Comeaux, Executive Director, Nevada Department of Taxation
David Horton, representing the Committee to Restore Constitution, Carson City
J. Emmett Sullivan, Jackpot Enterprises, Inc.
Following roll call, Chairman Price opened testimony on AB 600.
ASSEMBLY BILL 600 - Makes various changes relating to taxation of intoxicating liquor on Indian reservation or colony. (BDR 32-972)
Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau, provided committee members with a Bill Explanation for AB 600 attached hereto marked Exhibit C.
Alvin James, Chairman, Pyramid Lake Paiute Tribal Council, appeared on behalf of the tribe to encourage the committee's support and passage of AB 600.
Mr. James explained AB 600 provided in those cases where an Indian tribe assessed an excise tax on liquor at a rate equal to or greater than Nevada's liquor tax, Nevada would not collect its liquor tax in duplication of those transactions which occurred on the reservation. He iterated AB 600 effectively avoided the spectra of dual taxation on reservation commerce. He asserted this was a problem the Indian tribes had to combat frequently in the past, usually in federal court. Similar provisions had already been enacted by the legislature with respect to Nevada's cigarette tax and sales tax.
Mr. James communicated the tribe, as part of its comprehensive tax code, enacted the liquor tax with a rate equal to Nevada's rate. Thus far, the tribe had not been able to collect the liquor tax due to the state tax currently assessed and collected.
Mr. James asserted in the cases where Nevada sought to impose its tax upon reservation transactions in addition to the tribal tax, the reservation economy suffered a unique burden not present off the reservation. He clarified again reservation businesses were subject to both the tribal and state taxes, while residents beyond boundaries were only subject to state tax.
Mr. James believed the imposition of the state tax unduly burdened and discriminated against reservation commerce, but also significantly undermined the authority of the tribe to control and manage reservation economic activity.
Mr. James pointed out other tribes in Nevada had litigated this matter. Such litigation was expensive, time consuming and financially devastating to the tribes, as well as a depletion of state funds. Alternatives to litigation would be a welcome change. AB 600 offered an alternative resolution of an issue which would otherwise be litigated in federal court. AB 600 also recognized a sovereign authority of tribes to tax reservation commerce. Moreover, AB 600 expressly and correctly stated it did not purport in any way to infringe upon the sovereign authority of Indian tribes.
Mr. James stated AB 600 would have no effect on local governments. The revenues the tribe would receive from the liquor tax as a result of AB 600 would greatly enhance the tribes ability to provide services to members and nonmembers alike. A portion of the liquor tax revenues the tribe received would go directly to the tribes substance abuse program and enhance the tribes ability to provide rehabilitation and support services. The passage of AB 600 would go far in assisting the tribe to raise revenues and put those revenues to use.
Mr. James, on behalf of the tribe, urged the committee's favorable consideration of AB 600.
Mr. Marvel asked the outcome of the court cases in litigation. Mr. James responded litigation was still pending in many of the court cases and he was not sure of the outcome. Mr. James said the federal courts had ruled the Indian tribes could impose their own taxes.
Sheri Vidovich, Tax Appraiser, Pyramid Lake Paiute Tribe, commented with regard to the litigation. She asserted prior to the development of the Pyramid Lake tax code the tribe currently operated under, the tribe was in litigation with several non-Indian businesses and non-Indian ranchers within the boundaries of the reservation on a tax code developed in the early seventies. That particular case was Pyramid Lake v. Burchett. It was in court for ten years and was finally settled out of court as a result of the development of the new tax code.
Ms. Vidovich explained an agreement was made with the non-Indians and a new tax code was developed that was equally imposed on the non-Indians, the Indian businesses and the private Indian business owners. She stated the case was settled in 1991 out of court after ten years of litigation. As a result of the out-of-court settlement, the tribe was now operating under a new tax code.
Ms. Vidovich responded to Mr. Marvel stating she was not certain of the outcome in the other court cases where the liquor tax was challenged by the Indians.
Mr. Haller noted AB 600 used the term "intoxicating liquor", whereas NRS Chapter 369 defined each term in detail, i.e. beer, etc. He asked where the Reno-Sparks Indian Colony stood on the issue. Ms. Vidovich stated the Reno-Sparks Indian Colony presently did not sell any liquor in any of the smoke shops, but planned on selling liquor in the future. She asserted the Reno-Sparks Indian Colony was a member of the Inter-tribal Council of Nevada, which endorsed AB 600.
Mr. James added Pyramid Lake was a little bit different than most other reservations because it had four taverns and five convenient stores. Three of the convenient stores were owned and managed by members of the tribe and the rest of the businesses were managed by non-Indians. There was no other reservation with the volume of liquor sales Pyramid Lake had.
Chairman Price asked how many locations would the change in the law affect. Ms. Vidovich iterated there were presently six reservations or colonies selling beer, wine or hard liquor in convenient stores and three which were planning to sell liquor in the future.
Mr. Marvel asked if any of the colonies were collecting the Indian liquor tax. Ms. Vidovich communicated the colonies were not collecting the Indian liquor tax, only the state tax. Mr. Marvel emphasized at present there was no dual taxation. Ms. Vidovich agreed.
Ms. Vidovich provided committee members with a packet attached hereto marked Exhibit D, that included background information relating to the development of the Pyramid Lake Paiute Tribe's Tax Department, as well as her prepared testimony. Ms. Vidovich referred to and read portions of her prepared testimony attached hereto in Exhibit D. She referred to Tab B of Exhibit D that provided monthly liquor projections and explained same. She then referred to Tab C of Exhibit D that provided information with regard to the tax fund use plan. The plan proved the tribe's commitment to put taxes to good use for badly needed services. She noted for committee members where each of the taxes were dedicated and the percentage dedicated. She emphasized many of the taxes went toward services the non-members, as well as the tribal members, took advantage of and benefitted from. Ms. Vidovich thanked the committee for their time and consideration of AB 600.
Carla Molino, resident of Pyramid Lake, private business owner and member of the Pyramid Lake Tax Commission, testified in support of AB 600. Ms. Molino read from her prepared testimony, a copy of which is attached hereto marked Exhibit E.
Ms. Molino replied to Mr. Marvel question stating her convenient store did not contain any slot machines. Mr. James relayed the issue of placing slot machines on the premises fell under the National Indian Gaming Act. It would have to be negotiated with the state. Ms. Vidovich added when the smoke shops were first put into place the Tribal Council had chosen not to get into gaming. The issue had not been brought up since that time.
Chairman Price asked Ms. Vidovich what type of severance tax the Pyramid Lake Tribe had. Ms. Vidovich explained the severance tax would include anything severed from the ground. Presently there was a gravel pit on the reservation. That particular company operated on the reservation and paid the state and tribal tax and it was not a financial burden.
David L. Standing Bear, Tax Commissioner for Pyramid Lake Indian Tribe and an independent Nevada businessman, appeared to encourage the passage of AB 600. Mr. Standing Bear believed the passage of AB 600 was a responsible step toward economic responsibility for the tribal members.
Carole Vilardo, Nevada Taxpayers Association, opposed AB 600. She conveyed AB 600 was another attempt at eroding the tax base the state had relied on. The current fiscal note was minuscule because there were very few locations where liquor shops, taverns, etc., would be impacted by AB 600. She relayed as it became available a greater erosion would occur. She appreciated what the tribe conveyed and knew the tribe was looking for money and ways to fund programs, but AB 600 was not the way. The state could not afford to pass AB 600. The state could not afford to put forth any exemptions at any level.
Helen A. Foley, representing the 7-Eleven Franchise Owners Association, and spoke in opposition to AB 600. Ms. Foley wanted to make sure there was a level playing field with the sale of liquor. She did not want to see the Indian colonies or reservations able to sell liquor at a cheaper price than some of the convenient stores. She understood competition, but just wanted to make sure it was fair.
Ms. Foley iterated if there was a loss of revenue from liquor due to AB 600, the possibility of liquor tax increases would not be far behind and that certainly would fall on the backs of many of the convenient stores.
Bonnie James, representing the Las Vegas Chamber of Commerce, testified in opposition to AB 600. She echoed the reasons for opposition as stated by Ms. Vilardo.
John P. Comeaux, Executive Director, Nevada Department of Taxation, asserted the Department held a neutral position on AB 600. Mr. Comeaux referenced the fiscal note stating the estimate for the second year of the biennium would be a total fiscal impact of $10,574. The figure was based on information received from the liquor importers and wholesalers who sold to businesses located on the tribal trust lands. He pointed out AB 600 would not entirely impact the general fund because a small part of the tax on liquor went to the alcohol and drug abuse program, but 95 percent would impact the general fund.
Mr. Comeaux wanted to verify some of Ms. Vidovich's comments asserting the Department had met on a number of occasions with the officials from the Pyramid Lake Tribe. The Department of Taxation had reviewed the tribe's tax ordinances, sales taxes and cigarette taxes, as well as the proposed liquor tax ordinance. The ordinances were very well written and the dealings with the tribe were very positive.
Mr. Comeaux provided Mr. Marvel an answer to his question regarding the court cases that had dealt with the liquor tax. In those cases where both a tribal government and a state had attempted to levy a tax on the same product, a number of cases had reached the United States Supreme Court. Mr. Comeaux's interpretation of those cases was the courts held while the tribes had the authority to levy their own taxes, the state also could require the tribes to collect the state's tax unless the product the tribal government was selling was something unique to the tribe. One of the cases was from Washington state and the other one was from California.
Mr. Comeaux added the provisions contained in AB 600 were almost identical to the laws Nevada already had on the books in connection with the cigarette tax, other tobacco products tax, and the sales tax, whereby if a tribal government imposed its own tax in an amount equal to or greater than the state rate, then the state chose not to impose its tax.
Mr. Comeaux clarified the fiscal note, to his knowledge, contained statewide figures.
Chairman Price closed the hearing on AB 600 stating no action would be taken at this time.
Chairman Price asked for a report from the subcommittee on AB 188.
ASSEMBLY BILL 188 - Directs issuance of Nevada silver coins. (BDR 31-1094)
David Horton, representing the Committee to Restore Constitution, Carson City, and provided committee members a copy of his proposed bill attached hereto marked Exhibit F.
Mr. Ernaut expressed the silver coin bill had undergone many different forms, but the conclusion had been reached the coin would not be any sort of standard currency, but a $5 gaming token. That would allow properties to produce their own tokens in the other denominations. The $5 gaming token would bear the state seal on one side. Mr. Ernaut hoped the other side would bear some type of art work. The whole concept of the bill was to make it some collectible piece that properties could use to promote the state of Nevada.
Mr. Ernaut asserted there was a provision allowing the properties to pay the gaming taxes with the coins. The coins would not be redeemable in any restaurants or theme parks, etc.
Mr. Ernaut reported the coin would be minted on a trial basis and hopefully would catch fire and raise money for the state. The initial minting of the coin would take very little investment and could turn out to be a revenue source. It was the feeling of the subcommittee to start on a very slow basis.
Mrs. Williams asked if Mr. Ernaut had a fiscal note because to implement the program would cost money. Mrs. Williams indicated there was no money. Mr. Horton referenced section 3 of Exhibit F stating he believed the section stated it could be funded. Chairman Price clarified for Mr. Horton, Mrs. Williams was asking how the coins were going to be minted. Where was the money going to come from? Chairman Price said there was no appropriation stated in Exhibit F. Nevada would have to initially fund the minting of the coins. Mr. Ernaut thought possibly the casinos might agree to prepay money on a trial basis to make the coins. It would be "pay as you go." If it did not catch on, it could die. He suggested using very permissive language.
Chairman Price envisioned the coin being used in several different locations. It would be a $5 slot machine. Mr. Ernaut pointed out there really were not very many $5 slot machines outside the casinos, if any. Mr. Ernaut articulated it would have to be monitored very closely because the coin could not be construed as currency or the constitutional questions would arise and kill it.
Mr. Spitler agreed the coin should be limited to casinos only. Chairman Price iterated the coin would not bear the casino name on it. Mr. Ernaut clarified the language contained in Exhibit F needed to be modified extensively. Nothing was permanent at this point. Further discussion ensued.
Mr. Ernaut responded to Mr. Spitler stating he would like to see the Carson City Mint produce and distribute the coin. He thought with the Carson City Mint mark on the coin it would increase the value of the coin. Ultimately, it might need to be privatized. The state treasurer might be able to oversee the production. Mr. Ernaut reiterated the language needed to be modified.
Mr. Neighbors conveyed the coin would contain one-quarter ounce of silver.
Mr. Haller felt if the bill was passed, the minting of the coin should be privatized. The bill had already cost money to process, including the two meetings that had been held. Mr. Haller did not believe state taxes should be paid with the coin and that would be a mistake.
Mr. Ernaut had not informed the casino industry of the idea until he had full approval from the committee to go forward. Mr. Marvel asked if the coin would contain Nevada silver. Mr. Neighbors responded it would be a good idea, but it might not be a good idea to place the language in the bill itself.
Mr. Horton responded to a question explaining Section 5 of Exhibit F contained language to prevent forgery. Mr. Ernaut added the coin would be much harder to forge than the current tokens used in the casinos because the production makeup was closer to real currency. Mr. Horton said there were electronic comparators in the slot machines to prevent forgery. Mr. Horton also said there was technology in the making that included bar coding on the coin and was a nominal cost. Further discussion ensued between Mr. Marvel and Mr. Horton.
Mrs. Lambert asked if the slot machine would accept both the silver token and the casino token. Mr. Ernaut replied he thought it would be a good idea to have the five dollar slot machine accept only the silver coin.
Mrs. Lambert asked for clarification regarding the cost of the minting and the amount the casinos would be charged. Mr. Ernaut said the figures could be juggled at any time. Nothing was "written in stone."
Chairman Price asked Emmett Sullivan to come forward and give the committee some input.
J. Emmett Sullivan, Jackpot Enterprises, Inc., stated there were five dollar slot machines that accepted tokens. He pointed out the dollar machines were actually five dollar machines because five dollars had to be deposited in the machine to win the big jackpot. He stated there were five dollar machines that accepted one coin.
Mr. Sullivan conveyed the standard one dollar tokens Jackpot Enterprises, Inc. purchased cost approximately 27 cents apiece. The initial cost of the dies was approximately $930. The silver coin would have an additional cost of the silver and the handling of the silver.
Mr. Sullivan expressed his concern with the federal government. The federal government reserved the coinage of producing money to themselves. Mr. Sullivan said the government had become more liberal over the years, but still watched the casinos very carefully. He explained the tokens had to be used only in a particular establishment and could not be used in any other establishment. The tokens had to be kept separate for fear of angering the Treasury Department. Mr. Sullivan thought the coinage was a good idea if the federal government went along with it.
Mr. Horton believed there was a source of interference from the federal government with the free use of casino credit, which he would like to see circulating in the marketplace.
Mr. Ernaut said he would conduct some further research on the matter.
Mrs. Williams thought if a bank could accept the coin as payment of taxes, then the coin could be considered legal tender. Mr. Sullivan said the federal government would not allow any general flow of the tokens outside the establishments because then the token was approaching the legal tender status. Mr. Sullivan said he did have a common token for all the Lucky Stores that were interchangeable with all the Lucky Stores, but those tokens could not be used in a K-Mart or a Vons store.
Mr. Ernaut thought the provisions should be eliminated regarding payment of taxes or redeeming the coins at a bank. Mr. Ernaut said he was not comfortable passing any bill that would get the state in a constitutional battle. Mr. Ernaut would obtain some additional information and get back with the committee.
Chairman Price closed testimony on the coin bill.
Chairman Price asked for a subcommittee report to consider AB 233, the first reprint.
ASSEMBLY BILL 233 - Clarifies provisions regarding applicability of casino entertainment tax. (BDR 41-1402)
Chairman Price indicated the committee as a whole was the subcommittee examining AB 233. The recommendation was to delete paragraph (c) on page 1 of the first reprint.
Ted Zuend said he still had not received the information the committee requested from the Gaming Control Board. Discussion ensued regarding potential revenues. Mrs. Williams recollected if paragraph (c) was deleted there would be no difference in what the state currently received. There would be a fiscal impact if paragraph (c) was left in the bill.
Mr. Marvel said paragraph (c) made the law so loose, the casinos could not pick up the money on a temporary basis.
ASSEMBLYMAN WILLIAMS MOVE AMEND AND DO PASS AB 233.
ASSEMBLYMAN ERNAUT SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.
There being no further business to come before committee, the meeting was adjourned at 1:54 p.m.
RESPECTFULLY SUBMITTED:
DIANNE LAIRD
Committee Secretary
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Assembly Committee on Taxation
Thursday, May 27, 1993
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