NEW CUMBERLAND - Mountaineer Casino, Racetrack & Resort calls Hancock County's lawsuit over the hotel occupancy tax "an ill-conceived attempt to manufacture new tax revenues" for its coffers and blames revenue losses on increased gaming competition from neighboring states.
Mountaineer's answer to the lawsuit in Hancock County Circuit Court asks that the lawsuit be dismissed, stating the county's case lacks both legal support and logic.
"The sheriff's attempt at taxation alchemy must fail," said the answer filed by Charleston attorney Alexander Macia.
Hancock County Sheriff Mike White filed the suit in September on behalf of Hancock County commissioners after months of discussion about Mountaineer's practice of not charging the 6 percent tax on so-called comp, or complimentary, rooms.
Commissioners contend the practice, dating back to March 2009, has cost the county more than $500,000 in lost tax revenue. The county's lawsuit, assigned to 1st Judicial Circuit Court Judge Ronald Wilson, asks for a declaratory judgment in the amount of $600,000 and any other compensatory damages permitted by law.
Mountaineer General Manager Chris Kern said previously it is not reasonable to charge a tax for free services. Like many casinos, Mountaineer offers free hotel rooms as an incentive to regular patrons. The casino's "IN Club" loyalty program allows patrons to accrue points based on past gaming that entitle them to, among other things, complimentary rooms.
The county's lawsuit, authored by Weirton attorney Daniel J. Guida, reasons that even though a room is complimentary, it is not free because the gaming patron has earned the room through some sort of reward system. The hotel tax should be collected even on complimentary rooms, according to the lawsuit, because the occupant has paid in other ways - in the form of gambling activity, rewards earned and gambling losses.
Mountainteer's answer said such reasoning is disingenuous.
"Simply put, 6 percent of nothing is nothing, and thus, no tax is now or ever has been due." What's more, the answer claims Mountaineer has never collected the hotel tax on comped rooms.
Mountaineer has 357 hotel rooms at two lodging facilities: The Grande Hotel and The Lodge. According to the lawsuit, Mountaineer "comps" about 4,000 rooms a month to gaming patrons and has not been collecting the hotel tax on those rooms since March 2009.
According to an exhibit included with Mountaineer's legal filing, the number of rooms comped annually by the casino has increased from 10,295 in 2008 to 57,807 in 2012 (through Aug. 31). The figure for 2012 is nearly 72 percent of all the hotel rooms occupied.
Mountaineer's answer asks for a dismissal on four grounds:
The Legislature has determined as a matter of statute that rooms provided based on player history are provided free of charge; where there is no charge, there is no consideration.
The West Virginia Department of Revenue has opined that the hotel occupancy tax does not apply to complimentary hotel accommodations.
The Internal Revenue Service treats the complimentary accommodations as a gain to patrons and as an expense to casinos.
Past gaming activity cannot constitute consideration for future hotel accommodations because there is no mutuality of obligation.
West Virginia's hotel occupancy tax is imposed on the consideration paid for the room, which is usually a nightly room rate. The West Virginia Code defines consideration as the amount received in "money, credits, property or other consideration" for the right to occupy a hotel room.
While Mountaineer is arguably the biggest tourism draw in Hancock County, its unwillingness to collect the tax on comped rooms hurts local tourism, commissioners claim. That's because the hotel tax gets split evenly between the county, for parks and recreation purposes, and the Top of West Virginia Convention and Visitors Bureau, for the promotion of tourism.
Mountaineer's answer asserts that the county is only hurting itself by taking Mountaineer to court.
"Sheriff White has noticed that the golden eggs laid by the goose in his county have gotten smaller due to increased competition from neighboring states. Curiously, his solution to this problem is to neuter the goose so she cannot lay eggs anymore," the filing said. "He apparently believes that he can increase the taxes he collects from Mountaineer by impairing one of its primary means of generating revenue. ..."
The answer states that Mountaineer has sought to meet gaming competition from Ohio and Pennsylvania by increasing the amount of goods and services, including hotel rooms, that it provides at no cost to patrons.
In October, Hollywood Casino Columbus opened in Columbus. Similar casinos opened in Cleveland and Toledo in the spring.