27 April 1999 GST/HST Interpretation HQR0001410 - Coin-Operated Amusement Machines

Dear XXXXX

This is further to our meeting of October 29, 1998 with you and other members of the XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the XXXXX  XXXXX[.]  It is also in reply to your letters of December 11, 1998 and February 16, 1999 concerning this issue.

Interpretation Requested

The tax payable in respect of a supply provided from a coin-operated amusement machine that accepts coins of twenty-five cents is equal to zero, pursuant to subsection 165.1(2) of the Excise Tax Act (ETA).

Interpretation Given

As you know, subsection 165.1(2) of the ETA states that,

"Where the consideration for a supply of tangible personal property or a service is paid by depositing a single coin in a mechanical coin-operated device that is designed to accept only a single coin of twenty-five cents or less as the total consideration for the supply and the tangible personal property is dispensed from the device or the service is rendered through the operation of the device, the tax payable in respect of the supply is equal to zero."

Based on our understanding of the coin-operated amusement machines operated by XXXXX, as described at the October 29, 1998 meeting, it appears that subsection 165.1(2) of the ETA would apply to some of the amusement machines that accept coins of twenty-five cents. However, because the coin-operated amusement machines, such as video games, operated by XXXXX  can differ from one machine to another, each amusement machine must be evaluated separately to determine if that particular machine meets all of the conditions of subsection 165.1(2) of the ETA. We are therefore unable to state unconditionally that subsection 165.1(2) of the ETA applies to all of the twenty-five cent amusement machines operated by XXXXX  XXXXX[.] In order to assist your XXXXX in evaluating their coin-operated amusement machines, the following is a list of some of the types of amusement machines to which subsection 165.1(2) of the ETA does not apply.

•   Any machine that can make a supply for total consideration of more than twenty-five cents even if it can also make a supply for consideration of twenty-five cents or less. This includes all machines that provide the option to continue play of a specific game by depositing additional coins (i.e. not a new game but additional play at a given point or game level), regardless of when the coins are deposited. An example is where the price to play a particular game is twenty-five cents but play of the particular game may continue at a point or game level by depositing an additional twenty-five cent coin. This also includes all machines for which a greater number of games is obtained by inserting multiple coins. An example is a game that provides one game when a single coin of twenty-five cents is inserted but three games when two coins of twenty-five cents are inserted. In both of these cases a single supply for consideration of 50¢ has been made.

•   Any machine that can accept more than one coin as the consideration for a supply.

•   Any machine that can accept coins of denominations exceeding twenty-five cents (e.g. $1 or $2 coins).

•   Any machine that is activated by a token, a magnetized card, or anything that is not a coin.

As you are aware, the Coin-Operated Devices Remission Order was approved on March 4, 1999, granting tax relief to GST/HST registrants who made supplies through the type of coin-operated devices to which subsection 165.1(2) of the ETA applies. The Remission Order provides for a remission of the tax payable (and any related interest and penalties paid) on supplies made through qualifying machines between January 1, 1991 to April 23, 1996.

To make a claim under this Remission Order a registrant should file a General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST), form GST189. The person should clearly indicate on the form that the application relates to this Remission Order and file it by March 5, 2001. Applications should be sent to the Summerside Tax Centre at the address provided on the form.

If a registrant continued to account for tax on supplies made after April 23, 1996 through the type of coin-operated devices to which subsection 165.1(2) of the ETA applies, the registrant may file a separate rebate application for these amounts.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-9700.

Yours truly,

Ken Mathews, CMA
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

XXXXX
GOBI
Ken Mathews
GOBI