Harrah’s New Orleans, a Caesars Entertainment property in Louisiana, didn’t believe it should have to pay taxes on hotel rooms that were provided at a discount or for free. It hasn’t been paying the tax since 2001, but the State of Louisiana finally went after the company to collect its debt. When Caesars refused, it found itself responding to the order to pay up in court, where it continued to argue that it wasn’t liable for the taxes. Louisiana news outlet The Advocate reports that the judge overseeing the dispute sees things differently and millions of dollars Louisiana calculates as the outstanding tax debt will have to be paid by the casino operator.
The issue began 18 years ago when Harrah’s was regularly renting hotel rooms at nearby venues for its guests since it didn’t have a hotel of its own large enough to accommodate everyone (the 27-story hotel opened in 2006). It worked out a deal with Louisiana to expand the property and, in return, the casino saw its city-owned lease price reduced to $60 million from $100 million. However, there was no discussion of how the tax on discounted or comped hotel rooms.
Harrah’s assumed that the deal included the state hotel room tax, which is 9%. The judge presiding over the case, William Morvant, has determined that the casino is wrong and that Harrah’s has to cover the debt. Morvant, who covers the 19th Judicial District, stated, “There’s nothing vague and nothing ambiguous about this.”
The ruling will now allow everyone to try and figure out exactly how much is owed. Harrah’s has reportedly dutifully paid the local Orleans Parish hotel tax – just not the state tax – and bean counters will now try to determine what to collect from the company. Estimates put the amount between $30-$50 million, but the final amount will be decided when the two sides return to court for a follow-up trial this September.
Regardless of how much the courts decide Harrah’s needs to pay, the casino most likely won’t be pulling out the American Express Platinum card. Harrah’s is one of the properties that will be acquired by Eldorado Resorts as part of a deal worth $17.3 billion. That price tag includes over $8.5 billion in cash and stocks, as well as the assumption of more than $8.5 billion in debt, which could contain whatever amount Harrah’s is ultimately ordered to pay.