Reimbursement of Coin-Operated Machines Occupation Tax

To operate or exhibit a coin-operated music or coin-operated skill or pleasure machine in Texas, the owner of the machine must be licensed or registered with the Comptroller’s office. In addition, an annual $60 machines occupation tax must be paid for each machine exhibited. Machine owners are reimbursed for the payment of machine occupation taxes.

The Coin-Operated Machines Law, in Occupations Code Subsection 2153.205(a), provides that the first money earned from the exhibition of a coin-operated amusement machine may be paid to the owner as reimbursement for payment of state and local machine occupation taxes. Subsection (b) further stipulates that a portion of the money earned each year from the machine must be paid to the owner to reimburse the owner for the next year’s occupation taxes.

Therefore, when a coin-operated amusement machine is exhibited for the first time at a location in Texas, the first money earned from the machine may be used to reimburse the machine owner for that year’s occupation taxes. In addition, enough money must be taken each year from machine earnings to reimburse the owner for the following year’s occupation taxes.

The law does not specify when a reimbursement under subsection (b) occurs, just that the reimbursement must be made in the current year for the next year’s occupation taxes.

A machine owner is prohibited from waiving the reimbursement requirement, and from compensating the location owner more than 50 percent of the machine’s receipts after reimbursement. The law requires the Comptroller to revoke the license of a machine owner who violates these provisions. See Occupations Code Subsections 2153.205(c) and (d).

For more information, see the Coin-Operated Machines Tax section of our website and Coin-Operated Amusement Machine Regulation and Taxation (Pub 96-256).

*Originally published in the May edition of Tax Policy News – a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1205.html

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