Event tickets provided by a casino to patrons do not constitute “services” for the purposes of the Pennsylvania Race Horse Development and Gaming Act (the Act) and are therefore not subject to tax under the Act.
Under the Act, 4 Pa. Cons. Stat. Section 1101, et seq., casinos are subject to tax on their gross terminal revenue (GTR) and gross table game revenue (GTGR). Both GTR and GTGR are defined to include cash or cash equivalent that the casino receives from patrons from playing, less the cost of property that the casino distributes to a player as a result of playing the game. Travel expenses, food, refreshments, and “services” are not deductible from GTR or GTGR. Pa. Cons. Stat. Section 1103(1)(iii).
Greenwood Gaming & Entertainment, Inc. (Greenwood) owns and operates Parx Casino. As part of its operations, Greenwood provides tickets to events to its patrons as a result of their table gaming or slot play. In calculating its GTR and GTGR, Greenwood deducted the value of event tickets it gave to patrons from the GTR and GTGR tax base. The Commonwealth disallowed the deduction on the argument that event tickets constitute “services” under the Act.
On appeal, the Commonwealth Court held that an event ticket is neither a good nor a service, and the value of the event tickets should therefore be deducted from the GTR and GTGR tax base. (Greenwood Gaming & Entertainment, Inc. v. Commonwealth, No. 531 F.R. 2017 (Pa. Commw., 10/16/19) (unreported).)
The court reasoned that an event ticket is intangible property that confers a right to admission to an event. The court noted that the casino was not the direct service-provider for the event; rather, the performers provided the service. As such, a ticket provided by a casino to a third party’s event is simply a right of entry. The court rejected the state’s position that events are themselves services; the state’s own authority, the Uniform Commercial Code, included a service as a type of intangible. Further, the court reasoned that if the legislature intended that event tickets should not be deductible from patrons’ winnings, like the value of travel expenses, food, and refreshments, it could have expressly stated so.
Judge Robert Simpson, in dissent, viewed the effect of the majority’s opinion as an unreasonable result. He reasoned that there is no basis to treat event tickets provided to patrons based on their game play any differently than travel expenses, food, and refreshments. In his view, an event ticket is an indirect provision of a service, and should be treated as part of the GTR and GTGR tax base.
The case may be appealed. The outcome of the case will affect the application of the Act, and will provide precedent for what constitutes a “service” for Pennsylvania tax purposes.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Heidi Schwartz and Robert Careless are associates at Cozen O’Connor in Philadelphia.