Nevada bar chain Dotty’s told the Nevada Gaming Commission Thursday that it won’t pursue collecting nearly $250,000 in interest for its $3.1 million overpayment of gaming taxes over three years, but is now seeking the state reimburse $1.8 million.

The announcement by Dotty’s general counsel Kannon Smith about the interest forbearance was a relief to Commission members, who’d balked at the interest payment at a meeting in August, saying it was the operator’s fault for the overpayment. Dotty’s is owned by Nevada Restaurant Services. The stipulated agreement of a settlement is expected to return to the Commission for approval in October.

The interest payment was calculated by Nevada Gaming Control staff as required by state law, but that didn’t make it palatable to Commission members, since it continued to accumulate daily at $446 and currently calculated at 4¼%. The interest recalculated every six months was to be paid at the prime rate plus 2%.

The $3.1 million refund is the tax on the $46.9 million in gaming revenue involved or about 6.8% of that amount.

“That is a splendid opening statement,” said Commission member Brian Krolicki after Smith said they were waiving the interest payment. “Thank you to Dotty’s folks on that.”

Krolicki, a former state treasurer, said it was unfair to taxpayers to repay the interest, not knowing what interest was earned on it and how that changed over time. “Money that is due you is fine, but the interest was the problem.”

Senior Deputy Attorney General John Michela told the Commission that Nevada Restaurant Services recently filed a second claim for a refund that goes back two more years, instead of three initially, since there’s a five-year statute of limitations. Dotty’s said it will be unable to recover millions of dollars prior to that timeframe.

“Nevada Restaurant Services will only be seeking the principal amount of tax overpaid. It was pretty clear what the Commission wanted, and I counseled my client,” Smith said.

The previous claims went back to August 2021, based on a report on the Konami gaming system that manages the slot machines throughout the Dotty’s chain.

“Looking at the matter again with Konami, Nevada Restaurant Services believes that the data shows the wagers (before then) and has made a claim for refund to go back the entire five years,” Smith said. “Nevada Restaurant Services overpaid millions of dollars in taxes that are outside this five-year statute of limitations .”

The problem dates back to a casino management system that didn’t note the exclusion of cash promotions that aren’t considered gaming revenue. If $5 is given to the player and won back by the operator, for example, it’s supposed to be excluded from taxation. The system has been making correct calculations since April.

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