NEW CUMBERLAND, W.Va. — A judge’s decision to side with Hancock County in its lawsuit against Mountaineer Casino, Racetrack & Resort could result in a tax windfall of hundreds of thousands of dollars for the county.
While the dollar amount is still to be negotiated, it could reach $2 million, said Weirton attorney Daniel Guida, who is representing the county.
“The judge has ordered us to engage in meaningful negotiations (with Mountaineer),” Guida said. “He’s urging us to try to come to some resolution. If we don’t, then we may have to go back to the judge.”
On Monday, 1st Judicial Circuit Court Judge Ronald Wilson ruled that Mountaineer is obligated to collect the county’s 6 percent hotel occupancy tax on complimentary, or “comped,” rooms.
The Hancock County sheriff, the tax collector for the county, sued Mountaineer in 2012 over its practice of not collecting the tax for hotel rooms that are provided free to gaming patrons under the players reward club.
Hancock County commissioners said that Mountaineer’s practice had, since 2009, cost the county hundreds of thousands of dollars in potential tax revenue, while Mountaineer insisted that it could not levy a tax on something that is free.
In his ruling for partial summary judgment, Wilson said Mountaineer’s contention that “6 percent of nothing is nothing” is simplistic and not in keeping with the intention of the state law that allows counties to collect the hotel tax.
“The path to resolving this case presents more challenging labyrinths than Mountaineer recognizes. If Mountaineer has the right to have a free room marketing program that does not collect the hotel occupancy tax on 70 percent of its rooms, that program would defeat the purpose of the legislation authorizing the hotel occupancy tax,” Wilson said.
“The loser would be the citizens of Hancock County. … This isn’t an acceptable consequence of legislation that was created to give county commissions the opportunity to impose a modest 6 percent privilege tax,” he said.
West Virginia counties rely on the hotel tax, Wilson said, inasmuch as the revenues are split evenly between the county, for parks and recreation purposes, and the local convention and visitors bureau.
In the case of Hancock County, the smallest, northernmost county in the state, only two hotels – Mountaineer and Holiday Inn Express in Newell – collect the tax, Wilson said.
“The little towns of Chester and Newell are wonderful places to live, but they are not known as tourist destinations. … This issue is of great importance to all the citizens of Hancock County,” he said.
A lot of money, not just gamblers’ winnings and losses, is at stake. Mountaineer “comps” about 8,100 hotel rooms a month – a number that would generate an estimated $380,000 in tax revenue for the county annually, Wilson said.
While Mountaineer comped only about 10 percent of its hotel rooms in 2008, that number has steadily increased as out-of-state competition has increased – to the point that the casino now comps about 70 percent of its rooms to loyal customers, according to court documents.
Citing county figures, Wilson said the amount owed by Mountaineer for the uncollected tax between 2008-2013 is about $1.5 million. Adding the amount owed for 2014, plus interest, brings the total closer to $2 million, Guida said.
Wilson said the case turned on the question of whether Mountaineer’s complimentary hotel rooms are given to patrons truly for free or in return for some consideration other than money, such as past gaming activity.
Wilson resolved the issue by referring to Mountaineer’s “INClub” player reward system. “INClub” members can accrue points based on their type and length of play, and then redeem those points for certain rewards, including free hotel stays.
The invitation to accept free rooms is part of Mountaineer’s direct mail marketing program that provides vouchers to qualified members of the “INClub” program, Wilson explained in his ruling. Players can then redeem those vouchers for complimentary rooms.
“If you want the free room, you must gamble. … The court concludes that the rooms patrons receive are not truly free, and there is a mutuality of obligation on both parties,” he said.
Wilson said just because cash does not change hands does not mean that the room is free.
“If the legislative intent was for the 6 percent privilege tax to be imposed only upon the cash value of a free hotel room, why did the legislature … include in the definition ‘the amount received in money … or other consideration for or in exchange for the right to occupy a hotel room’?”
Hancock County Commissioner Mike Swartzmiller declined to comment on Wilson’s decision, except to say, “We’re looking forward to meeting with Mountaineer and finally settling this and getting it behind us so that we can move forward.”
Mountaineer General Manager Chris Kern declined comment.
Negotiations on the monetary settlement part of the case likely will begin within the next 30 days, Guida said.