Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 280.0686

280.0686 Gravitation II. "Gravitation II" is an automated game paying out tickets every time a player deposits 25 cents into the machine. It also dispenses additional tickets when the player wins. A value of 12 ½ cents is assigned each ticket. A customer, upon presentation of the tickets to the operator, is given credit towards the purchase price of the operator's merchandise.

Since the customer always receives tickets redeemable for merchandise when he deposits his money, the operator should not be treated as the consumer of any of the merchandise delivered to the customer, notwithstanding the fact that some portion of the tickets redeemed may have been obtained by the customer through skill or chance. Sales tax would be based on the gross receipt from this machine pursuant to Regulation 1670(d).

If the customer exchanges his tickets for merchandise from a third party pursuant to an agreement between the machine operator and the third party, the tickets would then be purchased back by the operator from the third party for a stated amount. In this situation, the third party is the retailer responsible for reporting tax based on the amount received by the third party pursuant to Regulation 1671(f). 8/19/82.