The Kansas Supreme Court upheld a tax refund for Boot Hill Casino and Resort, affirming a Court of Appeals Decision that affirmed a Board of Tax Appeals decision. Boot Hill challenged its payment of $801,588.95 in compensating use tax for the years 2009 through 2011.

The amount assessed was based on the sale price for electronic gaming machines that Boot Hill purchased out of state for use at the casino it manages in Dodge City on behalf of the Kansas Lottery.

Because the State, through the Kansas Lottery, is the actual owner and operator of the electronic gaming machines at issue, Boot Hill argued to the Kansas Department of Revenue that it did not owe the compensating use tax.

The Revenue Department rejected Boot Hill's argument and denied its refund request. Boot Hill appealed to the Board of Tax Appeals, which agreed with Boot Hill and granted the refund request. The Revenue Department appealed to the Court of Appeals, which affirmed the board's decision. The Supreme Court ruled that under the compensating use tax statute defining "use," a taxpayer must exercise within Kansas any right or power over tangible personal property incident to the ownership of that property for there to be a taxable use. The court found that the State, through the Kansas Lottery, is the owner of the gaming machines and maintains and exercises all rights and powers incident to that ownership.

Because Boot Hill had not "used" the gaming machines within the meaning of the statute, the court upheld Boot Hill's tax refund.