Did South Carolina Revenue Ruling 16-3 require an amusement-machine license for restaurant ordering and payment tablets?

Plain-English summary

South Carolina Revenue Ruling 16-3 held that the described restaurant table-top tablets were not subject to the license tax on coin-operated amusement machines or devices under Section 12-21-2720(A).

The tablets sat at dining tables and primarily let customers review menus, see food information, order food and beverages, call restaurant staff, complete surveys, receive loyalty-program information, and pay their bills. They could also display advertising and promotions.

Customers could pay a small one-time fee—typically $0.99—for unlimited access during the visit to educational applications, puzzles, cartoons, videos, or games. Even with those optional features, the Department found that the devices' purpose and intended use were to streamline ordering and payment, not to provide games or amusements.

Why the Department reached that result

Section 12-21-2720(A)(2) imposed a license requirement on specified machines used to play games or amusements. The Department looked at the tablet as a whole and focused on its purpose and intended use in the restaurant.

The entertainment features were ancillary to the ordering and payment functions. The games had no free-play feature, were not used for gambling, and did not include poker, blackjack, keno, lotto, bingo, craps, or another game of chance under the stated facts.

The ruling did not create a blanket exemption for every tablet that can run games. It expressly said that the treatment of a device in another industry depended on all facts surrounding that device's purpose and intended use.

Limits of the ruling

• The conclusion covered the amusement-machine license tax, not sales and use tax.
• The Department said evolving restaurant use or new technologies could change its position prospectively.
• A device used primarily for entertainment could produce a different result.
• Machines with prohibited gambling or games-of-chance features remained subject to Sections 12-21-2710 and 12-21-2712.
• SC Private Letter Ruling #18-2 later analyzed sales and use tax on restaurant-tablet vendor charges and customer game fees for a specific taxpayer; it did not replace RR 16-3's licensing analysis.

Common questions

Q: Did the optional paid games make each tablet a licensed amusement machine?

A: No. The Department found that games were ancillary and that the device's primary purpose and intended use were restaurant ordering and payment.

Q: Did the ruling say restaurant tablets can never require a license?

A: No. It tied the result to the described facts and warned that technology, usage, or industry practices could change the analysis.

Q: Does RR 16-3 decide whether tablet rental or game charges are subject to sales tax?

A: No. It addresses the coin-operated-device license tax. PLR 18-2 separately addressed sales and use tax for one taxpayer's arrangement.

Q: What if the device includes gambling or games of chance?

A: The ruling's facts expressly excluded those features and noted that prohibited devices could be illegal and subject to seizure and destruction under separate statutes.

Citations and references

• S.C. Code Ann. Section 12-21-2720(A) (license tax on specified amusement machines or devices)
• S.C. Code Ann. Section 12-21-2730 (specified billiard, foosball, bowling-lane, and skeeball equipment discussed by the ruling)
• S.C. Code Ann. Sections 12-21-2710 and 12-21-2712 (prohibited gambling or games-of-chance devices and enforcement)
• SC Private Letter Ruling #18-2 (separate taxpayer-specific sales and use tax analysis)

Subject

Electronic Tablet Table Top Ordering and Bill Payment Devices Used by Restaurants

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR16-3.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #16-3

SUBJECT:

Electronic Tablet Table Top Ordering and Bill Payment Devices Used by
Restaurants
(Coin Operated Devices Licensing Requirement)

REFERENCES: S.C. Code Ann. Section 12-21-2720 (2014)
AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public. It is an
advisory opinion issued to apply principles of tax law to a set of facts or a
general category of taxpayers. It is the Department’s position until superseded
or modified by a change in statute, regulation, court decision, or another
Department advisory opinion.

Question
Is a “table top ordering device” used by restaurants at each dining table to streamline customer
ordering and customer payment, as described in the facts stated herein, subject to a license tax on
coin-operated amusement machines or devices under Code Section 12-21-2720(A)?
Conclusion
Based on the facts presented herein, the purpose and intended use of the “table top ordering
device” used by restaurants at each dining table is to streamline customer ordering and customer
payment, not the playing of amusements or video games. The “table top ordering device” is
therefore not subject to a license tax on coin-operated amusement machines or devices under
Code Section 12-21-2720(A).
NOTE: This advisory opinion reflects the Department’s official position regarding
electronic “table top ordering devices” used by restaurants at this time under the facts as
stated herein. Since the use of these devices in the restaurant industry could change and
new technologies continue to emerge, the Department’s position as to the use of these
devices by the restaurant industry is subject to change due to a future statute, regulation,
court decision, advisory opinion, or changes in the restaurant industry’s usage and
application of these devices. Any change in South Carolina’s position will be prospective.
The Department’s position regarding the use of a “table top device” in other industries is
dependent on the purpose and intended use of the device as determined by a review of all
the facts surrounding the particular device.
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Facts
Restaurants in South Carolina have begun utilizing electronic tablet table top ordering and bill
payment devices (hereafter, “table top ordering devices” or “devices”). The purpose and
intended use of these devices is to streamline the ordering and bill payment processes by
allowing restaurant patrons the ability to order food and beverages through a mobile menu and to
pay for meals on demand.
Restaurants using these devices place one device at each dining table. The devices display
detailed descriptions of menu items, including dietary/nutritional information. In some cases the
devices provide pictures of menu items and videos of food preparations. Advertisements and
promotions may be displayed on the device during the meal, and patrons may use the device to
call their waiter or waitress. The device may also present customer satisfaction surveys,
comment/suggestion cards, and information regarding customer loyalty programs.
In addition, the devices may contain ancillary software programs for customers to use or play
educational applications, puzzles, cartoons, videos, and/or games. 1 For a small, one-time fee,
typically $0.99, patrons receive unlimited use of the educational applications, puzzles, cartoons,
videos, and/or games. The fee is added to the patron’s bill along with the patron’s food and
beverage orders.
The bill for restaurant charges and games, if any, is paid at the end of the patron’s visit by credit
card, debit card, coupon, or gift card through the device or by traditional means through
restaurant staff.
The purpose of this advisory opinion is to address South Carolina’s licensure requirements as
applied to these table top ordering devices used by restaurants as described in the facts herein.
Discussion
Code Section 12-21-2720(A) imposes a license tax on various amusement machines or devices.
In particular, Code Section 12-21-2720(A)(2) imposes a license requirement on coin-operated
machines for the playing of games or amusements. 2 This provision reads:
(A) Every person who maintains for use or permits the use of, on a place or
premises occupied by him, one or more of the following machines or devices shall
apply for and procure from the South Carolina Department of Revenue a license
1

With regard to games, the device contains no free play feature, is not used for gambling, and does not contain
poker, blackjack, keno, lotto, bingo, craps, or any other game of chance of whatever name or kind. It should be
noted that any video game machine with a free play feature or any machine or device licensed pursuant to Section
12-21-2720 and used for gambling or other device used for the play of poker, blackjack, keno, lotto, bingo, craps, or
pertaining to games of chance of whatever name or kind is illegal under Section 12-21-2710 and is subject to seizure
and destruction pursuant to Section 12-21-2712.
2
Another provision, Code Section 12-21-2730, authorizes the licensure of billiard or pocket billiard tables, foosball
tables, bowling lane tables, and skeeball tables owned or operated for profit and which do not require a slot. This
provision, however, is not applicable to video games of billiards, pocket billiards, foosball, bowling, and skeeball. It
is the longstanding position of the Department that such video games are subject to the taxes imposed by Code
Section 12-21-2720.

2

effective for two years for the privilege of making use of the machine in South
Carolina and shall pay for the license a tax of fifty dollars for each machine in
item (1), two hundred dollars for each machine in item (2), and four thousand
dollars for each machine in item (3):

(2) a machine for the playing of amusements or video games, without free play
feature, or machines of the crane type operated by a slot in which is deposited a
coin or thing of value and a machine for the playing of games or amusements,
which has a free play feature, operated by a slot in which is deposited a coin or
thing of value, and the machine is of the nonpayout pin table type with levers or
"flippers" operated by the player by which the course of the balls may be altered
or changed. A machine required to be licensed under this item is exempt from the
license fee if an admissions tax is imposed.

Based on the facts presented herein, the purpose and intended use of the table top ordering
device used by restaurants at each dining table is to streamline customer ordering and customer
payment. Although the device has features that allow the patron to use or play educational
applications, puzzles, cartoons, videos, and/or games, the purpose of the device is streamlining
ordering and bill payment and not the playing of amusements or video games. The table top
ordering device is therefore not subject to a license tax on coin-operated amusement machines or
devices under Code Section 12-21-2720(A).
NOTE: This advisory opinion reflects the Department’s official position regarding electronic
table top ordering devices used by restaurants at this time under the facts as stated herein. Since
the use of these devices in the restaurant industry could change and new technologies continue to
emerge, the Department’s position as to the use of these devices by the restaurant industry is
subject to change due to a future statute, regulation, court decision, advisory opinion, or changes
in the restaurant industry’s usage and application of these devices. Any change in South
Carolina’s position will be prospective. The Department’s position regarding the use of a table
top device in other industries is dependent on the purpose and intended use of the device as
determined by a review of all the facts surrounding the particular device.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
May 5
, 2016
Columbia, South Carolina

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