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HomeNewsArchivesV.I. Answer Desk: The V.I.'s Suit Against Southland Gaming

V.I. Answer Desk: The V.I.'s Suit Against Southland Gaming

A reader identifying him or herself only as "vi cpa" asks, "What is the status of the People of the Virgin Islands vs. Southland Gaming?"

The case is still pending, awaiting a ruling from the court, according to V.I. Department of Justice spokeswoman Sara Lezama.

"The government filed its complaint, Southland filed a motion to dismiss and the government filed an opposition to the motion. The parties are awaiting a ruling from the court on the motion to dismiss. The court has not issued a decision to date. Thus, the case is still pending," Lezama said in an email reply.

In June 2009, the V.I. government filed suit in V.I. Superior Court against Southland Gaming of the Virgin Islands for millions of dollars in gross-receipts taxes the government claims the company has failed to pay since 2003. The case number is 283-2009.

Southland operates hundreds of video lottery terminals on St. Thomas and St. John. VLTs are a type of video gambling very similar to but legally distinct from slot machines. St. Croix has no VLT’s but has a casino. Local law requires all corporations and individuals doing business in the territory to report their gross receipts and pay a 4 percent tax on the "gross receipts of business conducted" in the Virgin Islands.

"There is an exemption only on commissions paid for the sale of V.I. Lottery," Lezama said at the time the suit was filed. "There are no sales of V.I. Lottery tickets in connection with the operation or playing of video lottery, so Southland is not exempt, and to date they have paid nothing."

The government also alleges Southland has been improperly paying its own retailers first, before paying the government its fair share of net VLT revenues. "They need to give the government its share and then pay the retailers from their own share," Lezama said at the time.

The suit also challenges the validity of a master licensing agreement signed in 2003 that exempted Southland from paying gross-receipts taxes. The government claims the contract is invalid because the agreement was signed only by former Lottery head Paul Flemming and Southland’s president, and Flemming did not have legal authority to enter into such a contract. The agreement also needed a green light from the governor, the V.I. Lottery Commission and the commissioner of Property and Procurement, according to the V.I. Government.

In its motion to dismiss, Southland Gaming argues its contract was renewed in 2008 after being in effect for five years without anyone in the V.I. government raising any of the issues now alleged in its lawsuit. The gambling company also cites a tax clearance letter from the V.I. Internal Revenue Bureau saying it is current in its tax payments and a letter from the V.I. Lottery saying it did not consider Southland to be in breach of its contract as evidence that it has no dispute with the tax authorities or the V.I. Lottery.

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