Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-25

1976-1 C.B. 349

Section 4462 -- Harbor Maintenance Tax Rules

IRS Headnote

Pinball machines. A coin-operated pinball machine maintained in the business place of a taxpayer who offers a merchandise prize for each week's highest score constitutes a gaming device subject to tax under section 4461(a) of the Code.

Full Text

Rev. Rul. 76-25

Advice has been requested whether, under the circumstances described below, a coin-operated pinball machine is a coin-operated gaming device for purposes of the occupational tax imposed by section 4461(a) of the Internal Revenue Code of 1954.

A taxpayer maintains a coin-operated pinball machine at the taxpayer's place of business for use by customers. Each week an article of merchandise is offered as a prize to the customer who attains the highest score on the machine for the week.

Section 4461(a) of the Code imposes a special annual tax to be paid by every person who maintains for use or permits the use of, on any place or premises occupied by such person, a coin-operated gaming device as defined in section 4462.

As defined in section 4462(a)(1) of the Code, a coin-operated gaming device includes a so-called "slot" machine that operates by means of the insertion of a coin, token, or similar object and which, by application of the element of chance, may deliver, or entitle the person playing or operating the machine to receive, cash, premiums, merchandise, or tokens.

Section 45.4462-1(a)(2)(iv) of the Miscellaneous Stamp Tax Regulations provides, by way of example, that pinball machines in connection with which free plays are redeemed in cash, tokens, or merchandise, or prizes are offered to any person for the attainment of designated scores, are machines or devices within the scope of section 4462(a) of the Code.

A designated score for purposes of the example in the regulations is any score that determines prize winners. Thus, where the highest weekly score is the winning score, such score is the designated score.

Accordingly, in the instant case, the pinball machine is a coin-operated gaming device within the meaning of section 4462(a)(1) of the Code and the taxpayer is liable for the tax imposed by section 4461(a).