Greenwood Gaming & Entm't, Inc. v. Commonwealth

• Decision Date: 17 November 2021
• Docket Number: No. 19 MAP 2020,19 MAP 2020
• Citation: 263 A.3d 611
• Parties: GREENWOOD GAMING & ENTERTAINMENT, INC., Appellee v. COMMONWEALTH of Pennsylvania, Appellant
• Court: Pennsylvania Supreme Court

263 A.3d 611

GREENWOOD GAMING & ENTERTAINMENT, INC., Appellee

v.COMMONWEALTH of Pennsylvania, Appellant

No. 19 MAP 2020

Supreme Court of Pennsylvania.

Argued: April 13, 2021

Decided: November 17, 2021

Shane Dean Broderick, Esq., Karen Marie Gard, Esq., Michael John Scarinci, Esq., Joshua D. Shapiro, Esq., Pennsylvania Office of Attorney General, for Appellant.

Michael Joseph Herzog, Esq., Kevin M. Skjoldal, Esq., Mark Scott Stewart, Esq., Eckert Seamans Cherin & Mellott, LLC, for Appellee.

BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

JUSTICE TODD

In this appeal, we are asked to determine whether concert tickets which a casino distributed to its patrons for playing table games and slot machines at its facility constitute "services" for purposes of calculating the casino's taxable revenues generated by those games and machines under Section 1103 of the Gaming Act, 4 Pa.C.S. §§ 1101 -1194. After careful consideration, we conclude that such concert tickets are not services within the meaning of Section 1103, and so are excludible from these taxable revenues. We therefore affirm the order of the Commonwealth Court.

I. Background

Appellee Greenwood Gaming & Entertainment Inc. ("Greenwood") operates Parx Casino ("Parx"), located in Bensalem, Pennsylvania. During 2014, as part of its efforts to encourage slot machine and table game play, Greenwood distributed to patrons of Parx who played its slot machines and table games various "promotions, giveaways and direct player development." Stipulations of Fact, (R.R. at 25a-389a), 9/12/18, at 3. The items given away included cash, department store gift cards, and items of personal property, such as iPads, Michael Kors designer handbags, and Nutribullet food processors. See In re Greenwood Gaming , Docket Nos. 1622419, 1622420 (Dept. of Rev. Bd. Fin. filed May 10, 2017) (Exhibit G to Stipulations of Fact) (R.R. at 323a-329a). Parx also gave away tickets to attend live concerts and entertainment performances by artists such as Jay-Z, Beyonce, Justin Timberlake, and Lady Gaga. Stipulations of Fact at 7-8.

In 2016, Greenwood filed a petition for refund with the Board of Appeals of the Department of Revenue ("Board of Appeals") for the calendar year 2014, contending that it was entitled under Section 1103 of the Gaming Act to exclude from the taxable revenue attributable to its table games and slot machines the value of all cash and personal property it distributed to the players of those games.

Section 1103 defines the gross revenue derived from table games and slot machines, which is subject to state taxation. "Gross table game revenue" is defined, in relevant part, as "[c]ash or cash equivalents received in the playing of a table game" minus "[t]he actual cost paid by the certificate holder for any personal property distributed to a player as a result of playing a table game. This does not include travel expenses, food, refreshments, lodging or services ." 4 Pa.C.S. § 1103 (emphasis added). Similarly, "[g]ross terminal revenue" is defined, in relevant part, as "cash or cash equivalent wagers received by a slot machine" minus "[a]ny personal property distributed to a player as a result of playing a slot machine. This does not include travel expenses, food, refreshments, lodging or services. " Id. (emphasis added).

Thus, the definition of both gross table game revenue ("GTGR") and gross terminal revenue ("GTR") excludes from a casino's taxable revenue "personal property" it has distributed to players of table games and slot machines, respectively. Greenwood Gaming v. Commonwealth, Department of Revenue , 625 Pa. 55, 90 A.3d 699, 714 (2014) (" Greenwood Gaming I "). However, the value of "travel expenses, food, refreshments, lodging or services" – things colloquially referred to in the gaming vernacular as "comps," id. at 707 – are not excludable from GTGR and GTR for taxation purposes.

In its refund petition, Greenwood sought to exclude the portion of the price it paid for the above-described concert and performance tickets, which ranged from $200 to $300 each, attributable to the admission cost of the event for which the ticket was issued. See Petition for Refund, 11/21/16, filed in In re Greenwood Gaming , Docket Nos. 1622419, 1622420 (Dept. of Rev. Bd. Fin.) (Exhibit C to Stipulations of Fact) (R.R. 116a-293a). Apparently, for some of these tickets, 25% of their total cost was for food, for which Greenwood did not seek reimbursement, given that the cost of food is not a permissible exclusion from a casino's revenue under Section 1103. Id. The total amount of the refund which Greenwood sought attributable to the admission price of the tickets was $28,770. Stipulations of Fact at 5-8.

The Board of Appeals denied Greenwood's refund petition, and Greenwood sought review of that decision from the Board of Finance and Revenue ("Board of Finance"). The Board of Finance granted Greenwood's requested relief in part, and denied it in part. Relevant to the instant matter, the Board of Finance ruled that Greenwood was not entitled to an exclusion for the concert tickets, concluding that "the tickets claimed by [Greenwood] are for admission to concerts, and ... are services for purposes of § 1103." In re Greenwood Gaming , supra , at 5.

Greenwood filed a petition for review with the Commonwealth Court. That tribunal reversed the Board of Finance in a split, unpublished, en banc decision authored by Judge Ellen Ceisler.¹ Greenwood Gaming v. Commonwealth of Pennsylvania , 219 A.3d 708 (Pa. Cmwlth. 2019) (" Greenwood Gaming II ")

Before the Commonwealth Court, the Commonwealth, echoing the reasoning of the Board of Finance, argued that the concert tickets constituted services, since the ticket merely conferred the right of admission to the event performance, and the event performance itself — an entertainment service — is what Greenwood paid for and the patrons received; hence, it argued that the cost of the tickets cannot be excluded from the casino's revenue under Section 1103. Greenwood countered that the tickets cannot be considered services as the term is used in the Gaming Act, and, to the extent that term is ambiguous, principles of statutory construction supported its interpretation.

In its opinion, the Commonwealth Court observed that the term "service" is not defined by the Gaming Act; thus, it turned to principles of statutory construction to determine its meaning. The court first noted that, in this Court's previous ruling in Greenwood Gaming I , we held that the definition of GTR in Section 1103 created exclusions from taxation, and, thus, to the extent its language is ambiguous, it must be strictly construed in a taxpayer's favor. The court reasoned that Greenwood Gaming I ’s holding required all terms used in Section 1103 to be construed in the taxpayer's favor.

The court characterized the concert tickets as intangible personal property, and, thus, neither a good nor a service. In arriving at this conclusion, the court relied on a concurring and dissenting opinion authored by Judge Renee Cohn Jubelirer in Yocca v. Pittsburgh Steelers Sports , 806 A.2d 936 (Pa. Cmwlth. 2002). That case concerned an action under the Unfair Trade Practices and Consumer Protection Law ("UTPCPL") brought by dissatisfied individuals who had purchased stadium seat licenses to Pittsburgh's football stadium that entitled them to buy season tickets for seats in a specified location for each season that the facility was in operation. Their claim was based upon representations made by the Steelers organization in promotional brochures distributed to prospective purchasers. With respect to the UTPCPL claim, the Yocca court determined that the seat licenses were option contracts which entitled the purchaser to buy season tickets for the entirety of the contract's duration, and, thus, could conceivably be viewed as a service as that term is defined in the UTPCPL. Id . at 947. However, Judge Jubelirer dissented from this portion of the majority opinion, as, in her view, the licenses were "intangible property" which qualified as neither goods nor services under the UTPCPL, and, hence, plaintiffs could not state a claim for relief under that act. Id. at 950.²

The Commonwealth Court in the instant matter regarded the concert tickets as analogous to the seat licenses in Yocca , because, in its view, they merely conveyed intangible rights — the right of attendance at the performance — and therefore did not constitute services as that term is used in other legal contexts, such as under Article Nine of the Uniform Commercial Code. Greenwood Gaming II , 531 F.R. 2017, at 5-6. The court rejected the Commonwealth's argument that the concerts themselves were services, because Greenwood was not the service provider; rather, the concert performers provided the entertainment services, and the tickets merely conveyed the right of the patrons to attendance. To the extent that the Gaming Act might be regarded as unclear, the court found that, under the doctrine of strict construction of taxing statutes, Greenwood was entitled to the benefit of its suggested interpretation. Ultimately, the court concluded that the concert tickets did not constitute services under the Gaming Act, and, thus, Greenwood was entitled to have their value excluded from its gross revenue.

Judge Simpson, joined by Judge Covey, dissented. Judge Simpson found that the term "services" as used in the definitions of GTGR and GTR in Section 1103 was ambiguous. While agreeing that, as a result of this ambiguity, Greenwood as the taxpayer was entitled to a strict interpretation in its favor, he, nevertheless, considered the Commonwealth Court's interpretation to create an absurd or unreasonable result which, in his view, justified disallowing the exclusion.

Judge Simpson considered the proper focus of the analysis to be on the underlying events for which the concert tickets were issued – i.e. , the entertainment performances themselves – given...