Is the fee a carnival game operator charges patrons to play a game of chance for a prize a taxable admission charge under New York sales tax law?

Plain-English summary

A carnival game operator who runs games of chance at carnivals throughout New York -- where patrons pay to play and have a chance at winning a prize, with no separate merchandise sold -- asked whether his per-play charges are subject to sales tax.

New York taxes "admission charges" to a "place of amusement," but the Department applied a 1982 Court of Appeals decision addressing nearly identical carnival games: because patrons don't pay anything just to enter the tent or area where the games are set up -- they only pay to actually play the game itself, hoping to win a prize -- the charge is for playing the game, not for admission to or use of a place of amusement. That distinction determines the outcome: since there's no separate admission charge here, and the game-playing fee isn't itself defined as a taxable admission charge, the carnival operator doesn't have to collect sales tax on what he charges patrons to play.

What this means for you

Carnival, midway, and game-of-chance operators

If your charge is strictly for playing a game (with no separate fee just to enter the area or tent where the games are), that charge shouldn't be treated as a taxable admission charge -- this tracks a long-standing 1982 precedent specifically about carnival-style games of chance.

Carnival and fair organizers

Be careful to distinguish a genuine admission charge (paying to get onto the fairgrounds or into a specific area) from a game-play fee -- the former can be taxable as an admission charge to a place of amusement, while the latter, standing alone, is not under this line of cases.

Accountants and tax professionals

This ruling leans entirely on Outdoor Amusement Business Assn. v. State Tax Commn., a controlling 1982 Court of Appeals decision -- any similar fact pattern (pay-to-play games of chance, no separate admission charge) should reach the same nontaxable result unless the facts differ meaningfully (e.g., a genuine cover charge to enter the game area).

Common questions

Q: Is a carnival game-of-chance fee taxable as an admission charge?
A: No, as long as there's no separate charge just to enter the area or tent where the games are played -- the fee is for playing the game, not for admission.

Q: Would the answer change if the operator also charged a separate entry fee to the game area?
A: Potentially, yes -- a genuine admission charge to enter a place of amusement is taxable under § 1105(f)(1); this ruling only addresses the pay-to-play fee itself, where no such separate admission charge exists.

Q: Does it matter that patrons might win a prize?
A: No -- the taxability analysis turns on whether the charge is an admission charge to a place of amusement, not on whether a prize is at stake.

Q: Can another carnival or game operator rely on this ruling?
A: No. It binds the Department only for this petitioner and these facts; another operator's specific charge structure should be reviewed on its own facts.

Citations and references

Statutes and case law:

• Tax Law § 1101(d)(2) (admission charge definition)
• Tax Law § 1101(d)(10) (place of amusement definition)
• Tax Law § 1105(f)(1) (admission charges to a place of amusement)
• Outdoor Amusement Business Assn. v State Tax Commn., 57 NY2d 790 (1982)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-05(18)S
Sales Tax
May 26, 2005

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040608A

On June 8, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from William H. Jones, 4923 Pelleport Ave., Orlando Fl 32812.
The issue raised by Petitioner, William H. Jones, is whether Petitioner’s charges to its
patrons at a carnival for playing a game with a chance to win a prize are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner operates games at carnivals in New York State. Petitioner’s patrons pay to
play a particular game with a chance to win a prize. Petitioner does not sell merchandise.
Applicable law and regulations
Section 1101(d)(2) of the Tax Law defines admission charge as “The amount paid for
admission, including any service charge and any charge for entertainment or amusement or for
the use of facilities therefor.”
Section 1101(d)(10) of the Tax Law defines place of amusement as “Any place where
any facilities for entertainment, amusement, or sports are provided.”
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
*

*

*

(f)(1) Any admission charge where such admission charge is in excess of ten
cents to or for the use of any place of amusement in the state . . . except charges to
a patron for admission to, or use of, facilities for sporting activities in which such
patron is to be a participant, such as bowling alleys and swimming pools. . . .
Opinion
Petitioner operates games at carnivals in New York State. Petitioner charges its patrons
to play in a game with a chance to win a prize. Pursuant to section 1105(f)(1) of the Tax Law,
admission charges to, or for the use of, any place of amusement in the State are subject to sales
tax, with the exception of charges to a patron for the use of facilities for sporting activities in

-2­
TSB-A-05(18)S
Sales Tax
May 26, 2005

which such patron is to be a participant. The court in Outdoor Amusement Business Assn. v State
Tax Commn., 57 NY2d 790[1982], rev’g on dissenting mem below, 84 AD2d 950 (4th Dept
1981), examined whether games, similar to those of Petitioner, are a place of amusement within
the meaning of the statute. As determined in Outdoor Amusement Business Assn. v State Tax
Commn., supra, the fee is paid by the patron to participate in games with the hope of winning a
prize. Since no charge is made for entering the tents or places where the games are played, the
fee is not an admission to or for the use of a place of amusement. Therefore, the amounts
charged by Petitioner to play the games are not for admission to or for the use of a place of
amusement and are not subject to sales tax.

DATED: May 26, 2005

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinionsare
limited to the facts set forth therein.