Georgia Coin Operated Amusement Machine Sales Tax Audit
Our firm was dealt with a new predicament where a GDOR auditor levied sales tax on the winnings of a COAM.
At issue is the taxability of transactions stemming from the winnings of coin operated amusement machines, administered by COAM. Rule 13.3 of COAM allows players of their coin operated machines to apply their winnings to the following three items without incurring a taxable transaction:
- Gas
- Grocery
- Lottery Reply
The auditor determined that the use of winnings in these circumstances are taxable transactions. If a player went from one machines to another machine, the auditor applied sales tax to the replay. Clearly, the replay was levied sales tax. Neither COAM or the State lottery commission has rules and/or regulations regarding record keeping of such transactions.
For the reasons mentioned above, we protested the liability as a result of the contrast between the rules surrounding COAM versus the audit procedure that was used in his audit. In essence, the auditor has determined all of the proceeds of the winnings were used to purchased fully taxable items that were simply not charged sales tax.
As this case is still undergoing review at the GDOR, the Department’s attorney referred to this article and both stated that the story that we are explaining above is being used as an affirmative defense, in addition to using it to advertise to prospective clients and for them to use it as an affirmative defense. This is not the case. It clearly states the facts as to what happened to our client and how undefined rules can lead to troubles during an audit and even on appeal. Furthermore, if you have read this article, I am certain that you would want to improve your bookkeeping on the winnings and exempt sales so that you do not land in the same predicament.
Georgia Coin Operated Amusement Machine Sales Tax Audit
