The owners of 12 Pennsylvania casinos have asked the state Supreme Court to declare that a tax on slot machine revenue is unconstitutional because the state does not broadly tax the cash-paying electronic gaming terminals, known as skill games, found in many bars and stores.
The lawsuit, filed Monday, could jeopardize more than $1 billion a year in tax revenue that goes toward property tax refunds and economic development projects.
Casino operators argue that the state violates constitutional guarantees of fairness in taxation by collecting about 54 percent of revenue from casino slot machines but not from skill-game terminals.
“There is no basis for requiring licensed entities to remit approximately half of their slot machine revenues to the federal government while allowing unlicensed entities to 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 block taxation of slot machines.
The casino’s owners include major casino corporations such as Caesars Entertainment Inc. and Penn Entertainment Inc., as well as dozens of other executives.
The state Department of Taxation declined to comment on the lawsuit. The Pennsylvania Gaming Control Board said it had just learned of the lawsuit and was currently reviewing it.
According to statistics from the American Gaming Association, Pennsylvania generates more tax revenue from casinos than any other state.
Skill or chance?
The fate of a lawsuit brought by the owners of 12 of the state’s 17 licensed and operating casinos likely remains unclear. Separate Litigation The state Supreme Court is considering the case.
The lawsuit, filed between the state attorney general’s office and skill-game maker Pace-O-Matic Inc., could determine whether skill games, which are common in non-profit clubs, convenience stores and bars, are unlicensed gambling machines and, as a result, must be shut down.
The lower courts had determined that Pace-O-Matic games are based on the player’s ability, not mere chance, like slot machines and other traditional gambling games that are regulated by states.
States have long argued that the devices are unlicensed gambling devices, operated illegally and subject to police seizure, while device manufacturers, distributors and retailers argue that they are regulated but legal games and are not subject to state gambling laws.
Lawmakers have long debated regulating and taxing these devices but have not reached an agreement.
It’s unclear exactly how many skill-game terminals there are in Pennsylvania, but the American Gaming Association estimates there are at least 67,000, more than any other state.
The casinos operate about 25,000 regulated slot machines, and gamblers wagered nearly $32 billion and lost just over $2.4 billion last year, with the state and the casinos essentially splitting the costs.
