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Harrah's Operating Co., Inc. v. State Department of Taxation

Supreme Court of Nevada

March 20, 2014

HARRAH'S OPERATING COMPANY, INC., Appellant,
v.
THE STATE OF NEVADA DEPARTMENT OF TAXATION, Respondent

Appeal from a district court order denying a petition for judicial review in a tax matter. Eighth Judicial District Court, Clark County; Kenneth C. Cory, Judge.

Affirmed in part, reversed in part, and remanded.

John S. Bartlett, Carson City, for Appellant.

Catherine Cortez Masto, Attorney General, and David J. Pope, Senior Deputy Attorney General, Carson City, for Respondent.

Cherry, J. We concur: Hardesty, J., Parraguirre, J.

OPINION

Page 851

CHERRY, J.:

In this case, we consider the application of Nevada's use tax to four aircraft purchased out of state and used to transport Harrah's executives and customers to and from its establishments worldwide. In particular, under NRS 372.258, goods purchased outside of Nevada are presumed not to be purchased for use in Nevada, and thus not taxable under Nevada's use tax statute, if (1) the first use of the goods occurs outside Nevada and (2) the goods are continuously used in interstate commerce for 12 months. In this case, we construe the first use requirement to apply to an aircraft's first flight that both originates and terminates outside of Nevada. Additionally, the parties stipulated to the fact that the aircraft at issue were continuously used in interstate commerce. Because two of Harrah's aircraft engaged the presumption of NRS 372.258 and the record does not rebut the presumption, we conclude that the Department of Taxation erred in its interpretation of NRS Chapter 372 and those aircraft are not subject to Nevada's use tax.

FACTS AND PROCEDURAL HISTORY

The parties stipulated to the following relevant facts. Appellant Harrah's Operating Company, Inc., is a Delaware corporation registered to do business in Nevada. Harrah's purchased four aircraft for the purpose of transporting Harrah's employees and guests to and from its establishments worldwide. Two of the aircraft, N88HE and N168CE, were purchased and delivered to Harrah's in Little Rock, Arkansas. According to their flight logs, those two planes flew to Las Vegas on their first flight. The other two aircraft, N89HE and N89CE, were purchased and delivered to Harrah's in Portland, Oregon, and their first flights thereafter went to Arkansas and California, respectively. The flight logs reveal that passengers were aboard each plane on its first flight and that the planes carried passengers on the majority of all flights. Each of the aircraft consistently flew to and from Nevada while in service. The parties stipulated that the planes have been continuously used ever since in the manner of their initial uses, i.e., in interstate commerce.

Harrah's paid Nevada use tax on each of the aircraft and then requested refunds for the taxes paid, claiming that the aircraft were not purchased for use in Nevada within the meaning of NRS Chapter 372. No sales or use taxes were paid to any other state. Respondent Nevada Department of Taxation denied the refund requests.

After the Department denied Harrah's refund claims, the matter was referred to the Department's administrative law judge (ALJ). The ALJ affirmed the Department's

Page 852

refund denials. Harrah's appealed to the Nevada Tax Commission, which upheld the ALJ's decision. Harrah's then filed a petition for judicial review, which was ...


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