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First Gold, Inc. v. South Dakota Dep't of Revenue & Regulation

Supreme Court of South Dakota

December 17, 2014

FIRST GOLD, INC., MINERAL PALACE, LP and FOUR ACES GAMING, LLC, Plaintiffs and Appellants,
v.
SOUTH DAKOTA DEPARTMENT OF REVENUE AND REGULATION, Defendant and Appellee

Argued November 17, 2014

As Amended February 24, 2015.

APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES COUNTY, SOUTH DAKOTA. THE HONORABLE MARK BARNETT, Judge.

SANDRA HOGLUND HANSON of Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota, Attorneys for plaintiffs and appellants.

MARTY J. JACKLEY, Attorney General, JARED C. TIDEMANN, JEROMY J. PANKRATZ, Assistant Attorneys General Pierre, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice. GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 602

KONENKAMP, Justice

[¶1] Three Deadwood casinos jointly brought a declaratory judgment action in circuit court seeking a ruling that their " free play" promotional programs are not subject to gaming tax under SDCL chapter 42-7B. After an adverse ruling in circuit court, the casinos appealed.

Background

[¶2] First Gold Hotel, Mineral Palace Hotel and Gaming, and Four Aces Gaming, LLC (Establishments) each run promotional programs intended to attract patrons to their casinos. If the patrons join an establishment's " club," they receive coupons or credits called " free play." Each establishment has its own operating rules, but it is agreed that free play allows patrons to play slot machines without using any of their personal money. Patrons

Page 603

cannot purchase free play, and distributed free play credits or coupons have an expiration date. Free play cannot be redeemed for cash, merchandise, or other promotional offers. Yet patrons can win money from the use of free play credits or coupons.

[¶3] The Establishments brought suit in circuit court against the South Dakota Department of Revenue and Regulation requesting a declaration that free play is not part of adjusted gross proceeds and, therefore, is not subject to gaming tax. Both sides moved for summary judgment. The Establishments contended that free play is not subject to gaming tax under SDCL chapter 42-7B because no statute or regulation " dictates that free play must be included in gross revenue in the first place." The Department responded that free play is taxable because the gaming tax regulations specifically say that promotional awards are not a deductible event. The Department relied on a ruling ...


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