Tax Type
Retail Sales and Use Tax
Description
Amusement games
Topic
Taxability of Persons and Transactions
Date Issued
07-11-1986
July 11, 1986
Re: Request for Ruling/ Sales and Use Tax
Dear ****************
This will reply to your letter of May 8, 1986 seeking a ruling on the correct application of the retail sales and use tax to certain coin operated amusement games operated by ***************** (taxpayer).
FACTS
According to taxpayer, the coin operated games in this case involve a charge of per play for a chance to obtain a prize such as a small stuffed animal, bracelet, wrist watch, etc. through the operation of a crane claw for a limited period of time.
DETERMINATION
§58.1-603 of the Virginia Code imposes a sales tax on every person who engages in the business of selling at retail in this State, any item of tangible personal property. §58.1-602(16) of the Code defines "sale" to mean, "any transfer of title or possession,... of tangible personal property....for a consideration."
Inasmuch as the games operated by taxpayer in the present case do not entitle a player to a prize or other item of tangible personal property in every case, but rather involve an element of skill or chance, I find no basis for concluding that taxpayer is making a retail sale of such items for purposes of the sales and use tax.
Accordingly, taxpayer is deemed to be the user and consumer of all of its game prizes and must therefore either pay the 4% retail sales tax at the time of its purchase of such prizes from suppliers, or remit the complementary use tax on such items directly to the department.
It should be noted however, that if the games in the present case awarded prizes to all participants, with no element of skill or chance involved, taxpayer would be liable for the tax on all its gross receipts from the operation of the games, in accordance with §58.1-614 of the Virginia Code and §630-10-110 of the Virginia Retail Sales and Use Tax Regulations governing vending machine operators.
I hope that all of the above has answered your questions, but please let me know if we may be of further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner