Pennsylvania casinos sue to declare slot machine taxes unconstitutional – unless electronic games repay

The lawsuit filed Monday could jeopardize greater than $1 billion in annual tax revenues used for property tax refunds and economic development projects.

The casino owners argue that the state imposes a tax of about 54 percent on casino revenue from slot machines, but not on revenue from skill-based gaming terminals, violating constitutional guarantees designed to make sure fair taxation.

“There is no basis for requiring licensed companies to pay approximately half of their slot machine revenue to the state while allowing unlicensed companies to avoid paying taxes on that revenue,” they argue within the lawsuit.

The lawsuit asks the court to force the state to use the identical tax rate to games of skill or to ban it from levying taxes on slot machines.

The casinos’ owners include dozens of investors in addition to major casino corporations reminiscent of Caesars Entertainment Inc. and Penn Entertainment Inc.

The state’s tax office declined to comment on the lawsuit. The Pennsylvania Gaming Commission said it had just learned of the lawsuit and was currently reviewing it.

According to figures from the American Gaming Association, Pennsylvania generates more tax revenue from casinos than another state.

Skill or coincidence?

The fate of the lawsuit, filed by the owners of 12 of the state’s 17 licensed and operating casinos, likely will depend on the final result of a separate motion which will probably be decided by the Supreme Court of the State.

That case — between the state’s attorney general’s office and Pace-O-Matic Inc., a maker of games of skill — could determine whether the games of skill which have turn out to be commonplace in nonprofit clubs, supermarkets, bars and elsewhere are unlicensed gaming machines and ought to be shut down.

A lower court found that Pace-O-Matic games depend on player skill relatively than luck alone, as is the case with slot machines and other traditional games of likelihood regulated by the state.

The state has maintained for years that the machines are unlicensed gambling machines that operate illegally and might be seized by police. The machines’ manufacturers, distributors and retailers claim that they’re legal, albeit unregulated, games that are usually not subject to state gambling control laws.

Politicians have long been discussing the regulation and taxation of those devices, but no agreement has yet been reached.

It’s not clear exactly what number of skill gaming terminals there are in Pennsylvania, however the American Gaming Association estimates there are no less than 67,000, which can be greater than another state.

The casinos operate around 25,000 regulated slot machines, on which players wagered almost $32 billion and lost just over $2.4 billion last yr. The state and the casinos share this amount.