Rev. Rul. 62-52

Advice has been requested whether the coin-operated devices described below are considered to be coin-operated amusement devices or coin-operated gaming devices for purposes of the occupational tax.

A person maintains certain coin-operated devices called `skee ball alleys' and `pokerino tables' at his place of business for use by his customers. Both the `skee ball alleys' and the `pokerino tables' are long, rectangular-shaped machines. When coins are inserted into the machines, the machines are activated and balls are released for play.

In the `skee ball alley' game, a player manually rolls the balls down the alley in an attempt to place them in numbered bucket-type holes. The object of the game is to obtain a high numerical score by propelling the balls across the playing surface in such a way that they will roll into the highest evaluated holes, scorewise. If a player makes a certain high score, which is indicated on a lighted scoreboard at the end of the machine, he is given a prize by the person who maintains the `skee ball alleys.'

The the `pokerino table' game, a player manually rolls the balls down the playing surface into bucket-type holes bearing various markings that correspond to those found on ordinary playing cards. When a ball rolls into one of the holes, a figure, which corresponds to the one marked beside the hole, appears on a lighted scoreboard at the end of the `pokerino table.' The object of the game is to roll the balls into certain marked holes so that playing card combinations, such as `three of a kind,' `full house,' or `royal flush,' appear on the scoreboard. If a player makes a certain combination, he is given a prize by the person who maintains the `pokerino tables.'

Under the provisions of section 4461(a) of the Internal Revenue Code of 1954, every person who maintains for use or permits the use of, on any place or premises occupied by him, a coin-operated amusement or gaming device shall pay a special tax of ten dollars a year with respect to each amusement device, as defined in paragraph (1) of section 4462(a) of the Code, and $250 a year with respect to each gaming device as defined in paragraph (2) of section 4462(a) of the Code.

As defined in paragraph (1) of section 4462(a) of the Code, the term `coin-operated amusement device' includes any machine which is an amusement machine operated by means of the insertion of a coin, token, or similar object (but not including any device defined in paragraph (2) of section 4462(a) of the Code). That term also includes a similar machine which is operated without the insertion of a coin, token, or similar object.

As defined in paragraph (2) of section 4462(a) of the Code, the term `coin-operated gaming device' includes any machine which is a so-called `slot' machine which operates by means of 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. That term also includes a similar machine which is operated without the insertion of a coin, token, or similar object.

Revenue Ruling 57-395, C.B. 1957-2, 781, states that the determination of whether a coin-operated device is an amusement or gaming device cannot be made solely on the fact that prizes are awarded in connection with its operation. If the successful operation of a coin-operated device, with respect to which prizes are awarded, depends on the application of the element of chance, the machine is considered a gaming device. Generally, with respect to this type of device, the player after inserting the coin in the machine has no further control over the final result, which is attained by the element of chance, such as pulling a lever, setting reels into action, activity of dice, or in the case of `pin-ball' machines, propelling a ball over the playing surface by means of a plunger.

Revenue Ruling 57-395 further states that, on the other hand, where the insertion of a coin merely releases the machine for manual play and the successful operation thereof depends entirely on the skill of the player in operation the device, such as the propelling of pucks, the machine is considered an amusement device even though prizes may be awarded to some or all of the players. However, where a device of this type includes a feature whereby its successful operation, for which prizes are awarded, depends on the element of chance, it is considered a coin-operated gaming device.

The successful operation of the devices called `skee ball alleys' and `pokerino tables' in the manner described above depends upon the element of skill with which a player propels the balls across the playing surface and into the desired holes, rather than upon the element of chance. Accordingly, it is held that such `skee ball alleys' and `pokerino tables' are coin-operated amusement devices within the meaning of paragraph (1) of section 4462(a) of the Code, notwithstanding the fact that prizes are awarded for certain designated scores attained on the devices. Therefore, every person who maintains for use or permits the use of such amusement devices on any place or premises occupied by him is required by section 4461(a) of the Code to pay the special tax of ten dollars a year with respect to each amusement device.

The same conclusion would apply, of course, to such `skee ball alleys' and `pokerino tables' which are operated without the insertion of a coin, token, or similar object.