Were mobile point-of-sale devices amusement machines, and how were the device and premium-content charges taxed?

Plain-English summary

The Florida Department of Revenue found that these mobile point-of-sale devices were not coin-operated amusement machines because their predominant use was ordering, checkout, payment, surveys, and loyalty functions rather than entertainment.

That did not make the charges tax-free. The devices were tangible personal property leased to business customers, and those customers also made the devices available to patrons. The Department treated the arrangement as dual use rather than a resale-only lease.

Accordingly, the provider's device lease charges were taxable. Patrons' separate premium-content fees were also taxable as charges for possession or use of the device, even though the machines did not require amusement-machine registration or taxation on gross amusement receipts.

What this means for you

Equipment and software-enabled device providers

Classification depends on the device's predominant function and the nature of each charge. Avoid assuming that failing the amusement-machine definition makes a device lease nontaxable.

Businesses placing devices with customers

A resale exemption may fail when the lessee both uses the property in its own operations and allows others to use it. The ruling classified that arrangement as dual use.

Accountants and tax professionals

Analyze each revenue stream separately. Here, both the business-to-business device charge and the patron-facing premium fee were taxable rental income.

Common questions

Q: Did the devices need amusement-machine registration and the annual machine fee?
A: No.

Q: Were the provider's lease payments taxable?
A: Yes.

Q: Were patron premium-content fees taxable?
A: Yes, as licenses to use tangible personal property.

Citations and references

• Fla. Stat. §§ 212.02(10)(g), 212.02(15)(a), 212.02(24), 212.05(1)(c), 212.05(1)(h), and 213.22
• Fla. Admin. Code r. 12A-1.071(1)(a), (2)(b)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-009

Original ruling text

March 7, 2017

Executive
Director
Leon Biegalski

TAX: Sales and Use Tax
TAA NUMBER: 17A-009
ISSUE: Whether Taxpayer’s point of sale devices are amusement machines?
STATUTE CITE(S): Section(s) 212.02(24) and 212.05, F.S.
RULE CITE(S): Rule 12A-1.071, F.A.C.
QUESTION: Are Taxpayer’s point of sale devices used as an amusement machine?
ANSWER: No. Taxpayer’s charges are rental income. Since Taxpayer also uses the machines,
Taxpayer is considered to be a dual user.
March 7, 2017
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 17A-009
Lease of tangible personal property; Amusement machines
Section(s) 212.02(24) and 212.05, Florida Statutes (“F.S.”)
Rule(s) 12A-1.071, Florida Administrative Code (“F.A.C.”)
XXXXXXXXXX (“Petitioner”) (“Taxpayer”)
XXXXXX
XXXXXX
Dear XXXXXX:
This letter is a response to your petition dated October 22, 2016, for the Department’s issuance
of a Technical Assistance Advisement (“TAA”) to Petitioner, regarding whether Taxpayer’s
devices are considered amusement machines. Your petition has been carefully examined, and
the Department finds it to be in compliance with the requisite criteria set forth in Rule Chapter
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Page 2 of 2
Technical Assistance Advisement
12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the
authority of section 213.22, F.S.
Facts
Taxpayer is a XXXXXXXX of a mobile point of sale device XXXXXX XXXX enhance the
XXXXXX XXXXX customer’s satisfaction and increase XXXX sales and XXXXXX
efficiencies. The mobile point of sale device is a XXXXXXXXXX XXXXXX XXXXXX
XXXXXXX XXXXXXX XXXXXXXXXX. The mobile point of sale device facilitates order
placement, order add-ons, XXXXXXX information, check out and payment, customer
satisfaction surveys, and customer loyalty programs.
The mobile point of sale device provides detailed descriptions of certain XXXX items, and in
some cases pictures and even videos of XXXXX are available for customer viewing. It permits
customers to place orders for XXXXXXXXX XXXXXXXX XXXX throughout the XXXXXX,
XXXXXXXXXXXXX, XXXXXX, and to pay their XXXX directly through the mobile point of
sale device. The customer is given the option to pay the check by credit card, debit card, or even
a gift card.
The XXXXXXXX receives the benefit of better customer education, increased sales, quicker
XXXXXXX turnover, increased customer satisfaction, and greater guest loyalty. Guests have
better control over the pace of the XXXX and are able to keep their payment cards secure. An
average XXXXXXX will have 50 XXXXXXX XXXXXXXX mobile point of sale device at
each XXXXX. It is accessible only to the customer XXXXXXXXXX, and approximately 80%
of the customers will use it if paying by credit card. When the XXXXXX paid using the mobile
point of sale device, information is obtained regarding the customer to promote loyalty programs
and help XXXXXX management.
A customer may pay a “Premium License Fee” to access additional software programs, including
educational applications, puzzles, cartoons, videos, and games. The customers may watch as
many videos and cartoons and play as many games as they like during their visit. Approximately
15% of the customers access premium content. Taxpayer charges the XXXXXXXX a service
fee for each mobile point of sale device used at the XXXXXX.
Requested Advisement
Taxpayer seeks guidance as to whether the mobile point of sale device is a coin-operated
amusement machine.
Taxpayer Position
Taxpayer maintains that the mobile point of sale devices are not coin-operated amusement
machines because they are not designed primarily for the purposes of entertainment or
amusement but for the restaurant industry.

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Technical Assistance Advisement
Applicable Law
Section 212.05(1)(h), F.S., imposes sales tax on income earned from the gross receipts taken
from “coin-operated amusement machines.” Section 212.05(1)(h)3.b., F.S., requires the operator
of a machine to pay a $30 fee per year for each machine.
Section 212.02(24), Florida Statutes, provides:
(24) “Coin-operated amusement machine” means any machine operated by coin,
slug, token, coupon, or similar device for the purposes of entertainment or
amusement. The term includes, but is not limited to, coin-operated pinball
machines, music machines, juke boxes, mechanical games, video games, arcade
games, billiard tables, moving picture viewers, shooting galleries, and all other
similar amusement devices.
Section 212.05, F.S., provides that any person who leases or rents tangible personal property in
Florida is exercising a taxable privilege. Section 212.02(15)(a), F.S., provides that a "sale" of
tangible personal property includes the lease or rental of tangible personal property. Section
212.05(l)(c), F.S., imposes tax on the gross proceeds derived from the lease or rental of tangible
personal property. The terms "lease" and "rental" are defined by s. 212.02(10)(g), F.S., to
include the lease or rental of tangible personal property and the possession or use thereof by the
lessee for a consideration, without transfer of title to the property. Rule 12A-1.071(l)(a), F.A.C,
provides that a lease includes a transaction under which a person secures for a consideration the
temporary use of tangible personal property which is operated by or under the direction or
control of the person or his employees.
The XXXXXX are using the mobile point of sale device as a dual use, because it is being used
by both the XXXXXXXXX and the XXXXXXXX’s customer. Therefore, the charge to the
XXX by Taxpayer and the charge made to the XXXXXXX’s customer for the “Premium License
Fee” are both subject to sales tax. See Rule 12A-1.071(2)(b), F.A.C, which provides that the
resale exemption does not apply to purchases of tangible personal property by a dealer for the
"dual purpose of leasing it to others and also for his own use."
Response
The mobile point of sale device is not considered to be a "coin operated amusement machine," as
defined in s. 212.02(24), F.S. This is because the predominant use is by the XXXXXXXX
without the premium content. This assumes that the primary revenue stream to Taxpayer is from
the payment by the XXXXXX to Taxpayer and that the XXXXXXX retains most of the income
from the “Premium License Fee.” Also, typically, amusement machines do not have a dual use.
Accordingly, these devices need not be registered with a fee paid and tax collected on gross
receipts.
Although the devices are not taxed as amusement machines, mobile point of sale devices are
tangible personal property. The lease of tangible personal property is subject to sales tax. Based

Page 4 of 4
Technical Assistance Advisement
on the facts, Taxpayer’s primary income is from leasing the mobile point of sale device to the
XXXXXX. The XXXXXXXXX is then using it for the "dual purpose of leasing it to others and
for its own use."
Taxpayer is doing business in Florida and is therefore required to register with the Florida
Department of Revenue to collect and remit the sales tax on the lease payments received from its
customers, such as XXXXXXXXs.1 The lease of the mobile point of sale device by Taxpayer to
the XXXXXXX is not exempt for resale purposes. The XXXXXXXXX uses the mobile point of
sale device to facilitate order placement, order add-ons, XXXXXXXXXXXX, and customer
satisfaction surveys. When the patron of the XXXXXXX makes the payment of the “Premium
License Fee” for "premium content" for the use of the mobile point of sale device, then sales tax
must be collected on that charge also. The patron is taking "possession or use" of the mobile
point of sale device, as it is "operated by or under the direction or control" of the patron. The
“Premium License Fees” are subject to sales tax as a license to use tangible personal property.
The XXXXXXXX leases the mobile point of sale device for the "dual purpose of leasing it to
others and also for its own use." Both rental revenue streams are subject to sales tax, as provided
in Rule 12A-1.071(2)(b), F.A.C.
This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which
is binding on the Department only under the facts and circumstances described in the request for
this advice, as specified in section 213.22, F.S. Our response is predicated on those facts and the
specific situation summarized above. You are advised that subsequent statutory or
administrative rule changes, or judicial interpretations of the statutes or rules, upon which this
advice is based, may subject similar future transactions to a different treatment than expressed
in this response.
You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an
effort to protect confidentiality, we request you provide the undersigned with an edited copy of
your request for Technical Assistance Advisement, the backup material and this response,
deleting names, addresses and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department within 10 days of the date of this
letter.
Respectfully,

Chuck Wallace
Technical Assistance & Dispute Resolution
850-717-7541
1

The sample lease provided with Taxpayer’s request for advice provides that the lessee is responsible for payment
for all taxes due on fees charged under the contract. Taxpayer should note that the lessor and lessee are jointly and
severally liable for taxes due on these fees.

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Technical Assistance Advisement

Record ID: 212108