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Zeigler Insurance Agency I 'Inc.
54J S. Spring St .. MIchigan 096J
COIN
MACH INE
REVIEW
4
FOR
SEPT .
T942
above, would practically eliminate this
source of revenue from the merchant and
put the operators of these machines out of
business.
By reason of close cooperation of the
owners and operators of these devices, the
Treasury Department in the fiscal year of
1941·42 realized some 6Y2 million dollars
in revenue based upon the special tax un·
der Section 3267 of the Internal Revenue
Code. To place a $50 tax upon the pin
ball machines would eliminate fully 80%
of these devices from operation and would
thereby correspondingly reduce the annual
income derived therefrom. It is a well
known fact that the comparative earning
power or capacity of pinball games is
about 5% of that of a gaming device, com·
monly known as a 'slot machine', and to
put them on the same level of tax would
be highly inequitable.
Your witnesses therefore proposed that
an amendment to Section 3267·{b) of the
Internal Revenue Act be enacted as fol·
lows:
"Section 3267·(b)-as used in this
Part, the term 'coin operated amuse·
ment and gaming devices' means-OJ
so·called pin ball and other amuse·
ment machines, of whatever kind or
nature, which are operated by the in·
serting of a coin, token or similar ob·
ject, whether used for the purpose of
amusement or in any other manner,
and (2), so·called 'slot machines' which
operate by means of insertion of a coin,
token, or similar object and which, by
Specialists-Coin Machine Industry
application of the element of chance,
may deliver, or entitle the person play·
ing or operating the machine, to reo
ceive cash, premiums, merchandise, or
tokens. The term does not include
bona fide vending machines in which
are not incorporated gaming or amuse·
ment features. For the purposes of this
section, a vending machine operated by
means of the insertion of a l ·cent coin
which, when it dispenses a prize, never
dispenses a prize of retail value, or
entitles a person to receive a prize of
a retail value of more than 15c, shall
be classified under clause 1 instead of
clause 2.
"Coin operated counter games, incor·
porating amusement or gaming fea·
tures, which entitle persons playing to
receive merchandise prizes, not exceed·
ing in value one package of ci'garettes,
shall be classified under clause I-rate
$10.00 annual tax."
The Internal Revenue Bureau has reo
cently ruled that the operations of pin ball
games or machines which entitles the player
to receive cortpensation for unused fre e ,
games, such games are taxable under the
classification of gaming devices and there·
fore at the rate of $50 per machine per
year. Since Section 3267, Subsection B,
clause 1, of the Internal Revenue Act, ap·
pears to be ambiguous as to the exact
meaning of a pinball machine, and, by
impJi'cation, would seem to tax, not the
physical characteristics of the game, but
the use or operation of the same, which in
ANOTHER MONTB
NEARER VICTORY!
..
~k~
INTERNATIONAL MOTOSCOPE REEL CO., Inc.
PENNY ARCADE HEADQUARTERS SINCE 1895
Manufacturers of Photomatlc and Other Famous Coin Operated Equipment
~4·01
ELEVENTH STREET, LONG ISLAND CITY, NEW YORK
XMAS
CARDS
Los Angeles. Calif.
our opinion is contrary to the intent of the
law· making body, we respectfully suggest
that to overcome any further confusion as
to the use or characteristics of the game,
that the foregoing amendment be adopted.
The obvious reason for enacting these
special revenue statutes, is for raising fi·
nances with which to meet the war efforts;
your witnesses therefore suggest that appro·
priate legislation be adopted to cover the
following devices which also are amuse·
ment games and that they be taxed at the
rate of $10.00 per unit so that the revenue
derived therefrom will augment the Treas·
ury Department to the extent of approxi·
mately $40,000,000.
For the purpose of illustration, hereun·
der is a schedule compiled as of December
31, 1941, showing the various games which
could be taxed, and are in operation in the
United States.
Number in Proposed Rate
Operation
of Taxation
Amusement (pin·
ball) games .... 250,000
$10
Counter Amuse·
ment Devices.. 600,000
10
Jackpot slot
machines .......... no estimate of 50
Console amuse·
ment games :... 200,000
50
Misc. amuse·
ment machines 100,000
10
Automatic
phonographs .. 400,000
10
Cigarette vend·
ing machines.. 126,500
5
Beverage vend-
ing machines __
28,000
5
Candy bar
vendors .............. 250,000
3
Penny vend-
ing machines 3,000,000
3
Misc. vending
25,000
3
machines _.......
With regard to the phonographs listed
above, of which there are approximately
400,000 in operation throughout the coun-
try, cognizance should also be taken by
your committee of what is known as "wall
boxes" and "wired music" so that the max-
imum returns can be derived by reason of
their operation without throwing the bur-
den upon other amusement machines.
In conclusion we would again urge your
Honorable Committee that in order to de·
( Con tinued on Page 6)
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