Can an operator buy coin-operated amusement devices like pinball machines tax-free under the resale exemption?

Plain-English summary

An operator of coin-operated amusement devices — music machines, pinball machines, mechanical or electronic games — asked whether it could buy those machines tax-free under Utah's resale exemption, on the theory that it was effectively renting the machines to customers for their use.

The Commission said no, the purchase of the machines is fully taxable. Utah taxes the use of amusement devices directly, as its own category, under § 59-12-103(1)(g)(I) — the fees a customer pays to play are taxed as an admissions/use charge. That's legally distinct from the separate tax on the lease or rental of tangible personal property under § 59-12-103(1)(m). Since the customer's payment is being taxed as a use fee rather than as a rental/lease charge, the machine itself was never actually "sold, rented, or leased" to the customer in the tax-law sense — so the resale exemption in § 59-12-104(27) (available only for property purchased for resale, including rental or lease, in the regular course of business) doesn't apply to the operator's purchase.

The Commission also offered a structural argument: rentals of tangible personal property have been taxable in Utah since 1933, so if the amusement-device use fees were really just rental charges, the newer legislation specifically taxing "use of amusement devices" would have been unnecessary — the fact the legislature added a separate provision confirms these are treated as a distinct taxable activity, not a rental.

The ruling places amusement devices in the same category as several other things the Commission has already treated the same way: amusement ride equipment, ski lifts, billiard/pool tables, tour jeeps, telephone equipment used to provide telephone service, and coin-operated laundry/dry cleaning machines — in each case, the operator (not the end user) is the taxable retail purchaser of the equipment, because the equipment is bought to generate use-fee/admission revenue, not to be resold, rented, or leased to the customer in a taxable-transaction sense.

What this means for you

Arcade, amusement, and coin-operated equipment operators

Budget Utah sales/use tax into the cost of purchasing your machines — pinball, jukeboxes, claw machines, and similar coin-operated equipment don't qualify for the resale exemption just because customers pay to use them. The tax is instead collected on the revenue those machines generate (the use/admission fee), separately from tax on your own purchase of the equipment.

Businesses in adjacent equipment-based revenue models

The same reasoning extends to ski lifts, pool tables, jeep tours, telephone equipment, and coin-operated laundry machines — if your revenue model is charging customers a use/admission fee for access to equipment (rather than genuinely renting the equipment out to them), expect your own purchase of that equipment to be a taxable retail purchase, not a tax-free resale-inventory purchase.

Common questions

Q: Can I buy a pinball machine or similar coin-operated game tax-free as inventory for resale?
A: No — the resale exemption doesn't apply because operating the machine for use-fee revenue isn't treated as reselling, renting, or leasing the machine to the customer.

Q: Isn't charging customers to use the machine basically a rental?
A: No, legally — Utah taxes "use of amusement devices" as its own distinct category, separate from the tax on leases/rentals of tangible personal property.

Q: What other equipment gets this same treatment?
A: Amusement ride equipment, ski lifts, billiard/pool tables, jeep tours, telephone equipment, and coin-operated laundry/dry cleaning machines are all treated the same way.

Q: Can I rely on this 1995 ruling today?
A: Not directly — it binds the Commission only for the taxpayer and facts it addressed, and Utah's statutes and rules have been renumbered and amended repeatedly since. Verify current law before relying on it.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-103(1)(g)(I) (tax on amounts charged for use of amusement devices)
• Utah Code Ann. § 59-12-104(27) (resale exemption, including rental/lease, for property purchased for resale in the regular course of business)
• Utah Code Ann. § 59-12-103(1)(m) (tax on leases/rentals of tangible personal property)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/95-010.htm

Original ruling text

Response March 8, 1995

Request

March 8, 1995

Re: Advisory
Opinion -- Sales or Use Tax Application to the Purchase of Amusement Devices

Dear XXXXX(hand-written)

You requested an advisory opinion as to whether
purchases of amusement devices [the revenues from which are taxable under Utah
Code Annotated �59-12-103(1)(g)(I) (copy attached)] are subject to the Utah
sales or use tax.

Our research indicates as follows:

1. UCA
   �59-12-103(1)(g)(I) imposes the tax on amounts paid or charged for �use of
   amusement devices, including music machines, pinball machines, and mechanical
   or electronic games....�

2. UCA
   �59-12-104(27) allows exemption only for �property purchased for resales
   [including rental or lease] in this state, in the regular course of business,
   either in its original form or as an ingredient or component part of a
   manufactured or compounded product.�

3. The
   resale exemption referenced above would be applicable if the charges for use of
   the devices constituted charges for the rental or lease of tangible personal
   property which are taxable under UCA �59-12-103(1)(m). The fees or charges for the use of the
   subject amusement devices, however, are not being taxed for the sale, rental or
   lease of tangible personal property.
   Were this the case, since rentals of tangible personal property have
   been subject to the tax since 1933, the charges for �use� of the amusement
   devices would have been subject to the tax since 1933; and the new legislation
   would not have been necessary to impose the tax on the fees charged in
   connection with their use.

4. The
   purchase of a coin-operated or other amusement device does not constitute a
   purchase for resale, for lease, or for rental purposes. This treatment is consistent with the
   treatment of amusement ride equipment, ski lifts, billiard or pool tables,
   jeeps for jeep tours, telephone equipment used to provide telephone services,
   coin-operated laundry or dry cleaning machines, equipment used as part of or to
   provide various types of recreation, amusement, or entertainment which are now
   taxable under the statutes, etc.

5. Purchase
   of coin-operated or other amusement devices for the purpose of generating
   revenue from admissions or use fees are purchases at retail and are subject to
   the sales or use tax.

This opinion is based upon the facts presented in
your letter. Obviously, if there are
deviations from these facts, this opinion may be negated.

If you do not agree with this determination, you may
appeal to the Tax Commission for a formal hearing. The results of that hearing would constitute a declaratory
judgment and be appealable to the Utah Supreme Court. A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of
Rights are attached.

Respectfully,

Alice Shearer

Commissioner