Nevada to tax music events as Vegas becomes festival mecca

FILE -Carnival goers dance to music by Krewella at the Electric Daisy Carnival in Las Vegas. (The Associated Press)

LAS VEGAS – Northern Nevada has long been known as home to the freewheeling counterculture Burning Man festival in the starkly beautiful Black Rock Desert. In the past five years, Las Vegas, too, has evolved into a festival goers' mecca.

Hundreds of thousands of devotees now also flock to the psychedelic Electric Daisy Carnival rave, the iHeartRadio music festival, the Route 91 Harvest country festival and Rock in Rio, an import from Brazil.

But organizers fear new changes to Nevada's tax law could endanger their festivals' futures.

Last month, state lawmakers voted to impose a 9 percent tax on admissions to most live entertainment events, replacing a two-tier tax rate. The original tax had so many exemptions and exclusions that it became a headache to enforce.

All events in venues with a capacity of 15,000 or more must pay the fee even if they have nonprofit status — a provision that aims to prevent organizers from avoiding the tax by claiming a 501(c)3 exemption.

The measure won't take effect until October, months after this year's Electric Daisy Carnival wraps up, but general admission passes that cost about $360 now could soon include a fee of about $32.

"Nine percent is a huge tax," said Gary Bongiovanni, president and editor-in-chief of the concert industry trade publication Pollstar, adding he was surprised that Nevada of all places was taxing festival tickets.

"People from California move to Nevada to get away from taxes," he said.

Burning Man organizers, who have mused about moving elsewhere, argued after the bill's passage that attendees already support local businesses and pay gas and sales tax. They've called the new tax misguided.

Organizers of the Electric Daisy Carnival called it "extremely detrimental" for an industry that operates on "razor-thin margins in an already high-risk environment."

Pasquale Rotella, founder of Insomniac which produces the event, said he doesn't want to move the festival that's now in its fifth year at the Las Vegas Motor Speedway. But if he needed to, there are other places it could go.

"I love it here. I moved here. My home is here now," he said, also crediting the area for its support of the festival.

But doing the math to make it work will be difficult, he said.

He noted the festival lost $3 million the first year and didn't begin to make a profit again until its third year in Las Vegas.

"We have to build a city from scratch for 140,000 people," he said, noting that his staff brings in power to the speedway's parking lot and erects huge stages and carnival rides for a dance party spectacle. "It's a huge gamble."

He's raised prices before to cover the increasing costs and he said he doesn't doubt that some people may forgo attending if an extra 9 percent tax is added on top. He also said it ended any discussion of launching more events in Nevada.

"This is just something that we haven't gotten our heads around yet," he said.

The revamped tax has now looped in outdoor events, and even includes strip clubs and escort services.

Sen. Mark Lipparrelli, a Las Vegas Republican who co-sponsored the bill with Democratic Assemblywoman Marilyn Kirkpatrick, said the measure aims to broaden the tax base and avoid double-taxing purchases at some events by newly exempting food, beverage and merchandise.

Lipparelli said he doesn't expect the restructured tax to bring in any more or less revenue than the old structure because food tax revenue was a major driver.

Proponents also say the reworked law brings certainty for business operators and reduces the prospect of surprise fines. Under the old law, venue owners and auditors agonized over sweeping gray areas: Would a guitarist playing background music in a restaurant or go-go dancers at a nightclub trigger the tax, for example?

But the prospect of higher ticket prices is troublesome for festival attendees, who already feel put out by ticket, food and travel expenses.

Colton Hood, 21, and his wife Sarah, from Greeley, Colorado, rattled off what they spent for their Rock in Rio weekend in May. Tickets $300 each, gas another few hundred dollars, $600 for a few nights at the Excalibur and about $300 each for food and drinks. All told, nearly $2,000.

While an extra $10 or $20 on top of that wouldn't seem like a big deal, "it's annoying," Hood said.

Roberta Medina, a vice president with Rock in Rio and daughter of the music festival founder, wasn't aware of the tax plan but said it would be too bold to suggest it might sway the festival's decision to return.

Rock in Rio USA already has agreed with MGM Resorts International to return to their 37-acre site again in 2017 and 2019, and Medina said there have been talks to return every year after 2017.

But there's no guarantee.

"Nothing's no matter what. It has to be good for everybody," she said.