A restaurant's game room has coin/token-operated video arcade games and rides, plus a bumper car ride that also requires depositing tokens into a turnstile but is controlled by an employee. Are the receipts from all of these exempt as coin-operated amusement machines?

Plain-English summary

A restaurant operator asked about the tax treatment of its game room, which has coin-operated video arcade games and rides requiring a token to play, plus a bumper car ride that also requires depositing tokens into a turnstile for entry — but is controlled by a restaurant employee.

Note: the STAR system's own subject-matter heading for this letter is a blanket "Not Subject To Sales Tax" statement — but the letter's actual holding splits the game room into two different tax outcomes. This page's subject_title has been corrected to reflect that split holding.

Video arcade games and rides (true coin-operated machines): Receipts from coin-operated video arcade games and rides that require depositing a token or coin to play, and that display the required $60 annual occupation tax stamp, are not subject to sales tax. The owner or exhibitor of the machines still needs a Registration Certificate or General Business License, and the purchase price of each machine is subject to Texas sales or use tax (the play itself isn't taxed, but buying the machine is).

The employee-controlled bumper car ride: This is treated differently. Because an employee controls the ride, it's an amusement service, and receipts from it are subject to sales tax — even though tokens must be deposited in a turnstile to enter. The Comptroller was explicit that requiring tokens for entry doesn't, by itself, turn something into an exempt coin-operated amusement machine; depositing coins in a turnstile is simply a payment method for what is otherwise a staffed amusement service. Texas sales or use tax is also due on the materials and equipment used to provide that amusement service.

What this means for you

Restaurants and family entertainment centers with mixed game rooms

Don't assume every token-operated attraction gets the same tax treatment. A true self-service coin-operated machine (video game, mechanical ride) displaying the required occupation tax stamp is exempt on its play revenue — but an attraction that requires an EMPLOYEE to operate or control it (like a bumper car ride an attendant runs) is a taxable amusement service, regardless of whether tokens are used to pay for entry.

Amusement machine owners/operators

Remember the purchase price of your coin-operated machines is taxable even when the play revenue itself is exempt — the exemption covers the customer-facing receipts, not your own acquisition cost.

Accountants and tax professionals

This is a useful contrast pair for the coin-operated-machine exemption: the presence of a coin/token mechanism is necessary but not sufficient for the exemption — employee control converts what looks like a coin-operated machine into a taxable amusement service.

Common questions

Q: Are receipts from coin-operated video arcade games taxable in Texas?
A: No, if the machine requires a token/coin to play and displays the required $60 annual occupation tax stamp.

Q: Is the purchase price of a coin-operated arcade machine taxable, even though play revenue isn't?
A: Yes — the machine's purchase is subject to Texas sales or use tax.

Q: Is an employee-controlled bumper car ride treated the same as a coin-operated arcade game, just because it also uses tokens?
A: No — because an employee controls the ride, it's an amusement service, and receipts from it are taxable, regardless of the token-operated turnstile entry.

Q: What tax applies to the equipment used to provide a taxable amusement service like this ride?
A: Texas sales or use tax is due on the materials and equipment used to provide the service.

Q: Can I rely on this letter for my own game room or attraction lineup?
A: No. This opinion is based on the facts presented, and different though similar facts could produce a different response; it can be relied on only by the taxpayer it was issued to.

Citations and references

No specific statutes or rule numbers were cited in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9912953L

Original ruling text

December 22, 1999

Dear Toni Wilcox:

Your letter to Delia Gaona requesting clarification on taxation of the purchase
and use of video arcade games and amusement rides has been referred to me for
response. You state that in the game rooms of your restaurants you have
coin-operated video arcade games and rides requiring the deposit of a token to
play. You state that you also have a bumper car ride requiring the deposit of
tokens into a turnstile for customer entry. You further state that the bumper
car ride is controlled by an employee. You request clarification in the
taxation of the games and the rides.

Receipts from coin-operated video arcade games and rides that require the
deposit of a token or coin to play and that are required to display a $60
annual occupation tax stamp are not subject to sales tax. The owner or the
exhibitor of the machines is required to have a Registration Certificate or a
General Business License. The purchase price of each machine is subject to
either Texas sales tax or Texas use tax.

A bumper car ride that is controlled by the employee of a restaurant is an
amusement service, and the receipts from the service are subject to sales tax.
The fact that tokens or coins must be placed in a turnstile to enter the ride
does not make the bumper car ride a coin-operated amusement machine. Placing
the coins in a turnstile is a method of paying the entry fee for an amusement
service. Texas sales or use tax is due on all materials and equipment used to
provide the amusement service.

This opinion is based on the facts presented. Different though similar facts
could produce a different response. If you have additional questions or need
more information, you may call me at 1-800-531-5441, extension 3-4634. My
regular Austin number is 512/463-4634, and my fax number is 512/475-0900.
Written correspondence may be addressed to .

Yours very truly,

Elizabeth Grieder
Tax Policy Division

cc: Delia Gaona, ** Audit