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Judge says Deadwood casinos must pay taxes on promo play

DEADWOOD -- A South Dakota judge has rejected an attempt by three casinos to escape paying state gambling taxes on free promotional plays they give to customers.

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Circuit Judge Mark Barnett decided in favor of the state Commission on Gaming in the lawsuit brought by Deadwood establishments First Gold, Mineral Palace and Four Aces Gaming.

A commission rule specifically prohibits deducting promotional play.

"The value for the customers is in its potential to become money, and its value for the casinos is in its possibility of enticing patrons to play, which also translates to money," Barnett wrote in his March 13 decision.

The commission ruled in a different case in 2007 involving Cadillac Jack's that promotional play couldn't be deducted from a casino's adjusted gross revenue.

The state 8 percent tax is applied to adjusted gross revenue.

In 2009, the Deadwood Gaming Association petitioned the commission to eliminate free play from the taxable revenue. The commission denied that petition.

Barnett cited the previous decisions by the commission. He also noted the Legislature hasn't chosen to change the existing laws.

Commission members and their attorney discussed the judge's decision Wednesday at their regular meeting. The consensus was they are pleased by the judge's decision.

The state attorney general's office represented the gaming commission in the matter.

Commissioner Harry Christianson of Rapid City said the judge gave "some deference" to the commission's determination of 2007 that it was taxable.

"We were very happy," commission lawyer Mike Shaw of Pierre said. "The court accepted the state's arguments on every issue."

No word has been received yet from the casinos' lawyer, Sandra Hoglund Hanson of Sioux Falls, whether they will appeal to the South Dakota Supreme Court.

Judge Barnett said in his decision that the casinos have been paying taxes and didn't follow the process set in state law for seeking refunds.