Several Pennsylvania commercial casino owners are asking the Pennsylvania Supreme Court to determine whether the $1 billion they’re paying in taxes on their 19,000 slots is constitutional if skill games pay nothing.
On July 29, casino owners filed a complaint against state gaming regulators and the Pennsylvania Department of Revenue. The casino owners want the court to declare it unconstitutional that they pay over 50% in privilege tax while skill game machine manufacturers and their retail partners pay nothing. The casino owners claim the devices to be illegal slots and want the state to either tax the gray machines or stop taxing their slots.
The plaintiffs’ complaint reads:
To be clear, Petitioners do not seek to pay no taxes on revenue generated from slot machines; rather, they seek parity in the burden of slot machine taxes, as required by the Uniformity Clause.
Lawmakers haven’t made up their minds about the machines’ legality. In the meantime, law enforcement and gaming authorities have called upon the judicial system to make the call. Lower state courts determined that the machines do not qualify as gambling devices because of their element of skill, but the Pennsylvania Supreme Court may still overturn that ruling.
On June 18, the Pennsylvania Supreme Court allowed the state to appeal that case, which sports an unusual title because Pace-o-Matic—one of the device manufacturers—filed it in response to the seizure of its devices and proceeds by the authorities:
IN RE: THREE PENNSYLVANIA SKILL AMUSEMENT DEVICES, ONE GREEN BANK BAG CONTAINING $525.00 IN U.S. CURRENCY, AND SEVEN RECEIPTS
The two cases will be playing out in tandem and the casinos’ chances will depend heavily on the outcome of Pace-o-Matic’s case.
If the court finds the skill machines are illegal in the “Three” case, it may void the argument from the casino owners. Because in their lawsuit, the casino owners contend that legal slot machines and the skill and hybrid slot games are “the same class of property, namely slot machines.”
Conversely, the state contends in its appeal that skill and hybrid slot machines aren’t the same as casino slot machines. So, if the skill and hybrid slot machines are ruled legal in the “Three” case, the skill and hybrid slot machines will need to be licensed and taxed.
Pennsylvania Casinos Sue to Spur Action
While it’s possible the court could determine a way skill games aren’t gambling for licensing purposes but are for tax purposes, it’s highly unlikely.
However, the court petition filed on July 29 by the following entities does demonstrate that they’re unhappy with the tax situation’s status quo:
- Stadium Casino
- Greenwood Gaming and Entertainment
- Chester Downs and Marina
- Mountainview Thoroughbred Racing Association
- Washington Trotting Association
- Holdings Acquisition Company
- SugarHouse HSP Gaming
- Wind Creek Bethlehem
- GW Cumberland
During 2023 — the same year the entities say they paid $1 billion in state, county, and municipal slots taxes — Pennsylvania’s 17 commercial casinos saw $5.86 billion in gross gaming revenue (GGR), according to the American Gaming Association (AGA).
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