NEW CUMBERLAND - The success of Hancock County's lawsuit against Mountaineer Casino, Racetrack and Resort hinges on "consideration."
West Virginia's hotel occupancy tax is imposed on the consideration paid for the room, which is usually a nightly room rate. The West Virginia Code defines consideration as the amount received in "money, credits, property or other consideration" for the right to occupy a hotel room.
But what if the room is complimentary?
Hancock County commissioners believe in the case of a casino hotel, the 6 percent tax should be collected anyway because the occupant has paid in other ways - in the form of gambling activity, rewards earned and gambling losses, according to the lawsuit recently filed by Hancock County Sheriff Mike White against Mountaineer.
Commissioners have been debating the issue for months, complaining that the county is being cheated out of tens of thousands of dollars a year by Mountaineer's practice of not collecting the tax on so-called comp, or complimentary, rooms.
"Over the last several years, our losses have been in excess of $500,000," Commissioner Jeff Davis said.
The lawsuit, assigned to 1st Judicial Circuit Court Judge Ronald Wilson, asks for a declaratory judgment in the amount of $600,000 and any other compensatory damages permitted by law.
In 2009, the county received $465,000 from the hotel occupancy tax, commissioners have said. In the fiscal year that ended June 30, the county had projected hotel tax revenue in the amount of $300,000 but ended up receiving $215,000.
Officials don't believe the drop in revenue is the result of a decline in casino business at Mountaineer.
"The rooms are being occupied," Davis said.
Mountaineer has 357 hotel rooms at two lodging facilities: the Grande Hotel and the Lodge. According to the lawsuit, Mountaineer "comps" about 4,000 rooms a month to gaming patrons and has not been collecting the hotel tax on those rooms since March 2009.
Mountaineer General Manager Chris Kern, appealing to an advisory opinion from the West Virginia Department of Revenue, said it's not reasonable to charge a tax for free services.
The nonbinding opinion, dated Feb. 10, states in part, "When a hotel room is a complimentary or a 'comp' room, no money or other consideration is exchanged. There is no consideration upon which to calculate the tax. In essence, the tax rate is multiplied by zero."
Davis said the county looks at the issue differently and he makes no apologies for going after the money.
"I feel it's the right thing for the county commission to be doing," he said. "We should be looking after the citizens of the county and the taxes that we feel should be generated and kept here in Hancock County."
Hotel tax revenues are split evenly between the county, for parks and recreation purposes, and the Top of West Virginia Convention and Visitors Bureau, for the promotion of tourism.
The lawsuit reasons that even though a room is complimentary, it is not free because the gaming patron has earned the room through some sort of reward system.
"Casinos want to keep their best customers coming back. Players who have shown that they will give the casino a shot at their money are given complimentary items to encourage players to gamble and spend money," the lawsuit said. "The amount of 'comps' that a player is given usually depends on what games they play, how much they bet, and how long they play."
Rewards in the form of "comps" are especially important for West Virginia casinos, the lawsuit reasons, as a way to attract potential gaming customers away from competitors in Pennsylvania and Ohio.
Commissioner Danny Greathouse, who also is director of the Top of West Virginia CVB, said it's his understanding that none of those casinos collect the hotel tax on complimentary rooms. Officials from the three other West Virginia casinos did not return calls seeking comment.
Because of his position with the CVB, Greathouse said he abstained from votes and executive session discussions on the Mountaineer lawsuit.
Patricia Hamilton, executive director of the West Virginia Association of Counties, said it's ironic the county is going after money that is restricted for tourism promotion purposes - from what is arguably the biggest tourism draw in Hancock County.
Hamilton said other West Virginia counties will be watching to see what happens with the Hancock County case but that the law is clear.
"The (West Virginia) code does say that, regardless of how the room is paid for, it does not exempt the hotel tax. No matter how the room is acquired by the person, they are to pay the hotel tax," she said. "It does not seem to say that comped rooms are exempt."
New Manchester resident Mark Tetrault, who is running against Davis as the Republican candidate for county commissioner, has sided with Mountaineer, saying that the county's legal action hurts the local business climate.
Gaming patrons, he said, "allow Mountaineer to provide jobs in the casino. These customers purchase gas and food in our county. Most importantly, these customers contribute to the growth and stability of our county."
Commissioner Mike Swartzmiller said the county did consider options other than a lawsuit, but, in the end, "we wanted to do what is right by the taxpayers of Hancock County. ... We feel the tax needs to be collected, and we're going after it."