Pennsylvania casinos sue to declare slot machine taxes unconstitutional—unless electronic games pay up
The owners of 12 Pennsylvania casinos have asked the state’s highest court to declare a tax on slot machine revenue unconstitutional because the state does not widely impose it on electronic gaming terminals that pay for cash, known as skill games, and which can be found in many bars and stores.
The lawsuit, filed Monday, could jeopardize more than $1 billion in annual tax revenue that goes to property tax cuts and economic development projects.
Casino owners argue that the state’s collection of a tax of about 54 percent on casino revenue from slot machines, but not on revenue from skill gaming terminals, violates constitutional guarantees designed to ensure fair taxation.
“There is no basis for requiring licensed entities to pay approximately half of their gaming revenues to the Commonwealth while allowing unlicensed entities to pay no tax on those revenues,” they say in the lawsuit.
The lawsuit asks the court to force the state to apply the same tax rate to games of skill or to bar it from collecting taxes on slot machines.
Casino owners include dozens of managers, as well as major casino companies such as Caesars Entertainment Inc. and Penn Entertainment Inc.
The state Department of Revenue declined to comment on the lawsuit. The Pennsylvania Gaming Control Board said it had just learned of the lawsuit and was evaluating it.
Pennsylvania gets more tax revenue from casinos than any other state, according to figures from the American Gaming Association.
Skill or opportunity?
The fate of the lawsuit filed by the owners of 12 of the state’s 17 licensed and operating casinos is likely to depend on the outcome of separate lawsuit This is a matter that is being considered by the state Supreme Court.
The case — between the state attorney general’s office and Pace-O-Matic Inc., a maker of skill games — could decide whether skill games that have become popular in nonprofit clubs, retail stores, bars and other venues are unlicensed gambling machines and, as a result, must be shut down.
A lower court ruled that Pace-O-Matic games rely on player ability and not just luck, like slot machines and other traditional gambling games regulated by the state.
For years, the state has maintained that these devices are unlicensed gambling machines that operate illegally and are subject to confiscation by police. Machine manufacturers, distributors and retailers claim that they are legal, albeit unregulated, games that are not subject to state gambling control laws.
Lawmakers have long debated regulating and taxing these devices, but an agreement has remained elusive.
It’s unclear exactly how many skill gaming stations there are in Pennsylvania, but the American Gaming Association estimates there are at least 67,000, which would be more than any other state.
Casinos operate about 25,000 regulated slot machines, on which gamblers wagered about $32 billion last year and lost more than $2.4 billion. The state and the casinos effectively split that sum.
