Nevada’s fun tax: the good, the bad and the uncertain

Under a new law, Electric Daisy Carnival organizers will be taxed 9 percent on ticket sales. If the cost trickles down, you could pay about $30 more for your EDM mega-fest.
Photo: Steve Marcus

Electric Daisy Carnival is a week away, but a bill passed during this year’s legislative session has some concerned that this year’s EDM mega-fest could be Las Vegas’ last.

Senate Bill 266, designed to eliminate loopholes in Nevada’s Live Entertainment Tax, simplifies the former two-tiered system based on venue size into a single 9 percent charge on tickets. But the revision also expands the definition of "live entertainment" to include outdoor gatherings like EDC and Burning Man, which had previously been exempt.

Lawmakers say the changes are meant to be revenue-neutral, bringing the decades-old law—crafted when Vegas was more about cabarets than night-long raves—up to 2015 standards, rather than milking events for extra funds. Many businesses, like large indoor concerts that were previously taxed 10 percent, will actually save money under the new law, while ticket holders for such events could see a drop in prices. (As is, the tax brings in about $137 million a year, the majority of which goes to the state’s General Fund.) And the tax on food, beverage and merchandise at these events has also been scrapped. Nonprofits that sell fewer than 20,000 seats, in-state high school and collegiate games and professional teams are exempt, as is NASCAR, so long as at least two local races are held per year.

This year’s editions of EDC and Burning Man won’t be affected, as taxation doesn’t kick in until October 1. Going forward, however, organizers of the popular desert gatherings—which draw more than 100,000 and 60,000 attendees, respectively—will have to pony up millions of dollars in new expenditures to the Nevada Department of Taxation in order to keep the parties going. The extra cost doesn’t have to come directly from ticket sales, but it’s likely to trickle down to the consumer. Doing so would add an estimated $31.41 to EDC’s GA ticket price of $349 and $35.10 to Burning Man’s base fee of $390.

Promoters aren’t exactly pleased. Insomniac expressed concern that the new tax would push them into the red and force a move back to California, the festival’s home before relocating to the Las Vegas Motor Speedway in 2011.

“It’s been a very attractive place to produce music festivals, but this new law is extremely detrimental to our industry, one that generates hundreds of millions of dollars in revenue for local and state governments while operating on razor-thin margins in an already high-risk environment,” Insomniac spokeswoman Jennifer Forkish told Bloomberg in a statement, adding that EDC has generated more than $1 billion for the Southern Nevada economy over its four years here.

Burning Man officials called the new law “misguided” and estimate it will cost them an additional $2.8 million a year, which they’re still debating whether to pass on to consumers. Founder Larry Harvey has suggested such a tax could mean Nevada may no longer be the best fit for Burning Man, which runs this year from August 30 to September 7 in Northern Nevada's Black Rock Desert. Burning Man reps say the organization spends about $11 million in Nevada annually, with attendees contributing more than $40 million.

But it’s hard to imagine either event actually uprooting from Nevada. While Insomniac’s five-year contract with the Speedway ends this year, the company’s local ties run deeper than ever: head honcho Pasquale Rotella recently donated to Mayor Carolyn Goodman’s reelection campaign, and in-state investments have expanded beyond EDC to nightclub partnerships, industry conferences and, most recently, the Life Is Beautiful festival. Burning Man, meanwhile, will be hard-pressed to find the kind of expansive empty space it needs elsewhere.

But the changes may nonetheless strain relationships with events and businesses that have helped put Nevada on the map as a festival destination. They could even curb the market’s growth. When similar changes to the tax were proposed during the 2013 legislative session, Insomniac braced for higher fees by shelving plans for two new local festivals.

As Las Vegas’ economy increasingly relies on live events like concerts and festivals to help balance declines in gaming, adjusting the tax to new trends makes sense. But doing so will demand new finesse and foresight from lawmakers.

Follow Andrea Domanick on Twitter at @AndreaDomanick and fan her on Facebook at Facebook.com/AndreaDomanick.
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