Attorneys with the Kansas Department of Revenue rolled the dice for a third time on Thursday in an attempt to convince a court that $800,000 in state tax was properly assessed on purchases of gambling equipment installed at Boot Hill Casino &Resort in Dodge City.
The revenue department rejected the casino’s request for a refund of compensating use tax paid when gaming machines were bought for the casino that opened in 2009.
The Kansas Board of Tax Appeals overturned the agency’s decision in 2015 and the Kansas Court of Appeals affirmed BOTA’s ruling. The state asked the Kansas Supreme Court to reverse the order and block the refund.
The Supreme Court’s evaluation shines a light on a quirky state law that gave the Kansas Lottery ownership and operational control of the four casinos in Ford, Wyandotte, Crawford and Sumner counties.
To keep these casinos in compliance with prevailing interpretation of the Kansas Constitution, the Kansas Lottery delegates day-to-day management of the gaming facilities to companies entering long-term contracts.
The question on appeal is whether the entity that purchased slot machines and other hardware sitting on the cowtown casino’s gaming floor should be subject to the state tax on use or storage of tangible personal property.
“It was the Kansas Lottery that took ownership,” Boot Hill attorney Matthew Limoli told justices during oral arguments in Topeka.
Limoli said managers of the casino served as purchasing agent of the equipment, while the Kansas Lottery remained owner of the machines.
In terms of the casino management company, he said: “It is undisputed. There is no ownership.”
Michael Hale, who represented the revenue department, said elements of ownership existed when BHCMC LLC, the gaming facility manager in Dodge City, paid for the gaming equipment prior to a transfer to the Kansas Lottery.
The Kansas Lottery is prohibited by state law from performing the up-front purchase of slot machines and gaming tables the four casinos, he said.
“When you stand back and look at the case as a whole,” Hale said, “Boot Hill is trying to, for lack of a better word, shoehorn in under Lottery status as a state agency.”
He said the simple act of paying for equipment was sufficient to demonstrate ownership of the property.
In response to a question from Justice Caleb Stegall, Hale said he wasn’t concerned his legal argument could undermine judicial precedent on constitutionality of the Kansas Expanded Lottery Act that paved the way for construction of the casinos.