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Potential Sales Tax On Cashbox Receipts Alarms New York Operators

Posted On: 1/21/2009

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NEW YORK CITY -- The Amusement and Music Owners Association of New York said it is preparing for what could become the industry's biggest threat in the Empire State: the possibility of a sales tax imposed on the gross receipts generated by amusement devices.

AMOA-NY's government affairs specialist, Bill Schnell, said he was informed by the Empire State Restaurant & Tavern Association that coin-operated games might be considered as a tax source by the Dept. of Taxation and Finance. ESRTA analysts studying Gov. David Paterson's proposed budget and new taxes sent an email to the department asking if coin-operated devices placed in taverns were among the "various amusement charges" considered as new revenue sources. According Schnell, a high-ranking official sent a one-word reply: "yes."

In addition to taverns, the bill mentions bowling and sports centers, cabarets, healthclubs, amusement parks and campgrounds, among dozens of others location types where entertainment and sporting activities take place.

Schnell points out that the language about sales tax on amusement charges in the new budget bill is vague, and that no direct reference to coin-operated amusement devices and jukeboxes is made. And because it is imprecise, he cautioned, Tax and Finance officials could easily expand the law to include coin-op machines.

"Such a sales tax could be devastating to all of New York's operators," said AMOA-NY president Ken Goldberg. "Music and games operators, who for the most part accept quarters and bills in their machines, are not in a position to readily add an additional 5¢ or 10¢ for a game to pass the tax on through to the consumer."

New York has a 4% state sales tax. All counties and some cities add local taxes ranging from 3% to 4.75%. The combined sales tax in Utica, for example, is 8.75%. In New York City, total sales tax is 8.375%, which includes a 0.375% charge for the Metropolitan Transportation Authority.

"Whatever tax rate could be applied would most likely come out of the operator's top line," Goldberg said. "This is a serious matter for the trade and it's critical that New York operators get behind AMOA-NY on this. Whether or not the tax law on our amusement devices is changed, it's imperative that we remain vigilant."

Trying to close a $15.4 billion budget gap, Paterson called for 88 new fees and a host of other taxes in his 2009-'10 Executive Budget proposal, announced on Dec. 16. Also included is an "iPod tax" that taxes the sale of downloaded music and other "digitally delivered entertainment services." It is unclear if the digital entertainment proposal would tax jukebox activity.

Lawmakers are supposed to approve a spending plan by April 1, and because Paterson announced his budget strategy a month earlier than the usual time, Schnell expects little or no delay.

The association's next board meeting is scheduled for February 5. Information can be had by calling AMOA-NY executive director Danny Frank at (212) 279-1041.