Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 58-51

1958-1 C.B. 465

IRS Headnote

The tax on coin-operated gaming devices imposed by section 4461(2) of the Internal Revenue Code of 1954 applies to a vending machine which dispenses a variety of articles where the values of some of the articles which the patron may receive may be greater than the value of the coin required to operate it.

Full Text

Rev. Rul. 58-51

Advice has been requested whether a coin-operated vending machine that dispenses a variety of articles, the values of some of which exceed the value of the coin required to operate it, is taxable as a gaming device.

A vending machine dispenses a novelty in a plastic capsule each time a customer inserts a dime. The machine is filled with a packaged capsule mix of approximately 175 miniature items consisting of rings, dice, decks of cards, compasses, baby shoes, pen knives, charms, and cigarette lighters. The patron inserting a dime into the machine knows that he will receive a capsule containing a novelty. but he has no choice or advance knowledge as to which capsule the machine will dispense. The values of the articles dispensed by this machine range from one and six-tenth cents (charms) to 15 cents (cigarette lighter).

Section 4461(2) of the Internal Revenue Code of 1954 provides that every person who maintains for use or permits the use of, on any place or premises occupied by him, a coin-operated gaming device shall pay a tax of $250 per year with respect to each such device.

Section 4462(b) of the Code excludes from the term `coin-operated amusement or gaming device,' bona fide vending machines in which are not incorporated gaming or amusement features.

Where a coin-operated vending machine dispenses a variety of articles and, by the exercise of the element of chance, a patron may receive an article the value of which is greater than the value of the coin required to operate the machine, it must be classified as a coin-operated gaming device.

Accordingly, it is held that, since the values of the articles dispensed by the vending machine in the instant case range from one and six-tenths cents to 15 cents and the patron may thus, by chance, receive an article the value of which is greater than the value of the ten-cent coin required to operate the machine, the vending machine is classified as coin-operated gaming device and is subject to the tax imposed by section 4461(2) of the Code.