Casino appeals Luzerne County hotel tax bill on complimentary rooms

PLAINS TWP. — The Mohegan Sun Pocono casino has filed an appeal arguing it should not be forced to pay hotel tax on complimentary rooms as ordered by Luzerne County’s administration.

In a statement issued Monday, county Manager C. David Pedri said the county is “looking forward to our day in court.”

“The Mohegan Sun Casino came to Luzerne County with a promise of giving property tax relief. Instead of reducing the taxes on Luzerne County citizens, through this lawsuit they are refusing to even pay their own taxes,” Pedri said in a statement.

The issue dates back to 2018, when the county informed the casino it owed $1.36 million in delinquent hotel tax on complimentary rooms from January 2016 through August that year. Mohegan Sun presented objections and evidence opposing the action at an informal hearing in 2018, but the county proceeded to send the casino notice last month concluding the charge was “proper” and should be paid within 30 days.

In response, the casino filed an appeal asking the Luzerne County Court of Common Pleas to reverse the county’s decision, declare the tax on complimentary rooms impermissible and award the casino attorney fees and costs.

County Judge Fred A. Pierantoni has scheduled an evidentiary hearing at 9:30 a.m. on Nov. 2.

The casino is not contesting payment of the tax on non-complimentary rooms.

Filed by Attorney Robert N. Gawlas Jr., of Rosenn, Jenkins & Greenwald LLP, the casino’s appeal maintains:

The tax is authorized only on “consideration” hotel operators receive for each room rental transaction.

That doesn’t apply in this situation because “there is no payment or quid pro quo of any kind required from the guest in exchange for the complimentary room.”

“Past patronage prior to the provision of the complimentary room is insufficient to constitute ‘consideration,’ as it was neither rendered nor bargained for in exchange for the complimentary room,” it said.

While the casino “has a hope” that providing a complimentary room will prompt guests to spend more, there is no such guarantee. And if that happens, the casino already pays taxes on all net gambling revenues, and sales tax is paid on purchases from its restaurants and stores.

Mohegan Sun also noted numerous complimentary rooms are provided to casino employees, vendors and entertainers and asserted the county’s hotel tax assessment was based on “erroneous assumptions” regarding the occupancy rate and room rental rates.

In the past, the county’s law office has stood by its stance on the matter and argued the casino does not offer the complimentary rooms gratuitously but instead based on the “expectation of the guest spending or having spent resources at the property.”

The hotel tax is 11 percent here. The state charges 6 percent, and another 5 percent was tacked on in the county in 1996 solely to help fund county tourism and the Mohegan Sun Arena in Wilkes-Barre Township.

While the casino purchased naming rights for the arena, the facility is operated by a county authority appointed by county council.

After the county Treasurer’s Office takes 2% off the top to administer the county portion, the hotel tax split is 80% for the arena and 20% for the county visitors bureau.