The owners of 12 Pennsylvania casinos have asked the state’s highest court to declare that a tax on slot machine revenues is unconstitutional because the state does not generally impose it on cash-paying electronic gaming terminals known as skill games, which operate in many bars can be found. and shops.
The lawsuit, filed Monday, could jeopardize more than $1 billion in annual tax revenue earmarked for property tax rebates and economic development projects.
The state’s collection of the roughly 54% tax on casino revenue from slot machines, but not on revenue from skill gaming terminals, violates constitutional guarantees designed to ensure taxation is fair, the casino officials argue. owners.
“There is no basis for requiring licensed entities to pay approximately half of their slot machine revenues to the Commonwealth, while unlicensed entities may not pay taxes on such revenues,” they argue in the lawsuit.
The lawsuit asks the court to force the state to apply the same tax rate to skill games or to ban the state from collecting taxes on slot machines.
The casinos’ owners include dozens of clients, as well as major casino companies such as Caesars Entertainment Inc. and Penn Entertainment Inc.
The state Department of Revenue declined comment on the lawsuit. The Pennsylvania Gaming Control Board said it just became aware of the lawsuit and was evaluating it.
Pennsylvania generates 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 twelve of the state’s seventeen licensed and operating casinos, is likely tied to the outcome of a separate lawsuit that the state Supreme Court is considering.
That case — between the attorney general’s office and Pace-O-Matic Inc., a maker of skill games — could decide whether the skill games that have become commonplace in nonprofit clubs, convenience stores, bars and elsewhere are unlicensed slot machines and , must therefore be closed.
A lower court ruled that the Pace-O-Matic games are based on a player’s skill and not solely on chance, like slot machines and other traditional gambling games regulated by the state.
For years, the state has maintained that the devices are unlicensed slot machines that operate illegally and can be seized 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 discussed regulating and taxing the devices, but an agreement has remained elusive.
It’s unclear exactly how many skill gaming terminals there are in Pennsylvania, but the American Gaming Association estimates there are at least 67,000, which would be more than in any other state.
Casinos operate roughly 25,000 regulated slot machines on which gamblers wagered nearly $32 billion last year and lost just over $2.4 billion. The state and the casinos essentially split that amount.
