Rev. Rul. 74-124

Advice has been requested concerning liability for the special tax imposed by section 4461 of the Internal Revenue Code of 1954, with respect to the use of a certain coin-operated gaming device.

The coin-operated gaming device in question has tumblers, accepts nickels, and makes payoffs depending on the combination of objects on the tumblers. The device is sold to individuals who use it for personal pleasure or for exhibition as a collector's item.

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 him, a coin-operated gaming device as defined in section 4462.

Since section 4461(a) of the Code refers to "any place or premises," the fact that a coin-operated gaming device is used in a private residence rather than a commercial place would not exclude it from the tax. However, the general implication in that section of the term "maintains for use or permits the use of" is that someone other than the person who maintains the device will be the user and the operation of the device takes on the characteristics of a trade or business.

Therefore, where an individual uses the device only for his own pleasure or for exhibition as a collector's item, he is not maintaining for use or permitting the use of a coin-operated gaming device within the scope of section 4461(a) of the Code. Accordingly, he is not liable for the special tax imposed by that section.

On the other hand, should his operation of the device take on the characteristics of a trade or business, he would be maintaining for use or permitting the use of a coin-operated gaming device and, therefore, liable for the tax imposed by section 4461(a) of the Code.