I want to buy a complete coin-operated photo booth (camera, computer, and laser printer that produces a black-and-white photo on paper) and pay sales tax on the coin/bill income it generates instead. Does the booth itself qualify for a manufacturing exemption when I purchase it?

Plain-English summary

An operator asked about buying a complete, functional coin-operated photo booth — an enclosed booth with a seating area, a coin/dollar-bill mechanism, a camera, a computer, and a laser printer that produces (manufactures) a black-and-white photo on standard 8½ x 11 inch paper. The operator already pays and reports Texas sales tax on the coin/bill income the machine generates from customers, and asked whether the booth purchase itself qualifies for exemption.

The Comptroller confirmed it does: the entire photo booth purchase qualifies for exemption from sales tax as processing/manufacturing equipment under the Sec. 151.318 manufacturing exemption, because the booth's camera-computer-printer combination physically produces (manufactures) a photograph as its output. The operator can give the equipment supplier an exemption certificate citing the manufacturing exemption instead of paying sales tax at the time of purchase — while continuing to collect and remit tax on the machine's coin-operated income as before.

What this means for you

Coin-operated photo booth, kiosk, or similar automated-production-machine operators

If your machine's function is to physically produce a tangible output (like printing a photo) rather than just performing a service, the machine itself can likely be purchased tax-free as manufacturing/processing equipment under Sec. 151.318 — separate from the sales tax you owe/collect on the coin-operated usage revenue.

Vending and amusement machine businesses more broadly

This letter is a useful, narrow precedent for treating an automated production machine (not just a service or amusement device) as exempt manufacturing equipment — the distinguishing fact is that the booth actually manufactures a physical product (the printed photo), not merely a service or entertainment experience.

Accountants and tax professionals advising equipment purchasers

The exemption certificate route (citing Sec. 151.318 to the supplier) avoids paying tax upfront on qualifying manufacturing equipment; confirm the specific machine's function (does it physically produce a tangible product?) before extending this reasoning to other coin-operated equipment.

Common questions

Q: Does a coin-operated photo booth qualify for a sales tax exemption when purchased?
A: Yes — the complete booth qualifies as manufacturing/processing equipment under Sec. 151.318 because it produces a physical photo.

Q: How do I claim the exemption?
A: Give your equipment supplier an exemption certificate citing the Sec. 151.318 manufacturing exemption instead of paying sales tax at purchase.

Q: Do I still owe sales tax on the money the machine collects from customers?
A: Yes — the letter confirms the operator continues paying/reporting sales tax on the coin-operated income as before; only the equipment purchase itself is exempt.

Q: Can I rely on this letter for my own coin-operated equipment purchase?
A: No. This opinion is based on the facts presented, and other facts, though similar, may provide a different result; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318 (manufacturing exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9902235L

Original ruling text

February 17, 1999

Dear **:

This is in response to your request for a ruling on the taxability of a coin
operated photo booth. Your inquiry concerns the purchase of a complete
functional coin operated photo booth. The booth consists of an enclosed booth
with a sitting area, coin/dollar bill mechanism, camera, computer and laser
printer that produces/manufactures a black and white photo on 8 1/2 X 11 inch
white laser printer paper. Sales tax is paid/reported on the income produced by
this machine.

Response: The purchase of the complete photo booth will qualify for exemption
from sales tax as processing equipment. You may issue your supplier an
exemption certificate, citing the exemption for manufacturing equipment
available under Texas Tax Code 151.318, in lieu of paying sales tax on this
purchase.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division

cc: Ed Frye, Tax Assistance