SECTION 3.602. Licenses and Certificates, Renewals and Due Dates, Occupation Tax Permits and Exemptions

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Coin-operated amusement machine--Any kind of machine or device operated by or with a coin or other United States currency, metal slug, token, electronic card, or check, that vends or dispenses music or is operated for skill or pleasure. The term does not include an amusement machine designed exclusively for children under 12 years of age.

(2) General business license holder--A person who may engage in the business of manufacturing, owning, buying, selling, renting, leasing, trading, maintaining, transporting, or exhibiting in Texas, or storing a coin-operated amusement machine.

(3) Import license holder--A person who may engage in the business of importing, transporting, owning, buying, repairing, selling, or delivering a coin-operated amusement machine for sale or delivery in this state.

(4) Person--An individual, association, trustee, receiver, partnership, corporation, or other organization or legal entity, or a manager, agent, servant, or employee of an individual, association, trustee, receiver, partnership, corporation, or other organization or legal entity.

(5) Registration certificate holder--A person who is exempt from the licensing and recordkeeping requirements in Occupations Code, Chapter 2153 (Coin-Operated Machines) but who may not exhibit a coin-operated amusement machine unless the machine is registered annually with the comptroller.

(6) Repair license holder--A person who may engage in the business of maintaining, transporting, or storing a coin-operated amusement machine.

(7) Tax permit--The decal issued by the comptroller to an owner of a coin-operated amusement machine evidencing the payment of the occupation tax.

(b) Licenses and registration certificates.

(1) Annual general business, import, and/or repair license fees, and registration certificate fees. Annual license and registration certificate fees for a general business license holder, import license holder, repair license holder, and a registration certificate holder are payable in advance and cannot be prorated. The annual fees are as follows:

(A) for a general business license applicant with 50 or fewer machines, the fee is $200;

(B) for a general business license applicant with 51 to 200 machines, the fee is $400;

(C) for a general business license applicant with over 200 machines, the fee is $500;

(D) for an import license applicant, the fee is $500;

(E) for a repair license applicant, the fee is $50; and

(F) for a registration certificate applicant, the fee is $150.

(2) Age requirement for issuance of a license or registration certificate. No individual shall be issued a license or registration certificate by the comptroller for the operation of coin-operated amusement machines unless at the time the license or certificate is issued the applicant is 18 years of age or older.

(3) Information requirement for issuance of a license or registration certificate. An applicant for a license or registration certificate must provide all information required on the comptroller's application before a license or registration certificate will be issued or renewed.

(4) General business license and registration certificate notification requirement. A general business license holder must notify the comptroller in writing within 10 days of any change in ownership of a coin-operated amusement machine. A registration certificate holder must notify the comptroller in writing of any change in ownership of a coin-operated amusement machine and each time the location of a machine is changed within 10 days of the change.

(5) Occasional sale exemption for registration certificate holder. A registration certificate holder may make two sales of coin-operated amusement machines during any 12-month period without being required to obtain a general business or import license, if the certificate holder does not hold out as engaging (or does not habitually engage) in the business of selling coin-operated amusement machines. Before the third sale of a coin-operated amusement machine in a 12-month period by a registration certificate holder not previously in the business of selling, leasing, or renting coin-operated amusement machines, a general business or import license must be obtained. The transfer of title or possession of more than one machine in a single transaction will constitute one sale.

(c) Annual general business, import, and repair license renewals.

(1) License renewal applications are due November 30. License renewal applications will not be considered complete for processing unless the tax due and the license fee are remitted. Complete license renewal applications filed after the due date may result in the renewal license being issued after December 31, the expiration date of the existing license. In such a case a person may not operate coin-operated amusement machines after the expiration date until the renewal license is issued. A person who operates coin-operated amusement machines without a license or with an expired license is guilty of a Class A misdemeanor.

(2) An applicant who properly completes the license renewal application and remits all fees and taxes with it by the due date may continue to exhibit or display coin-operated amusement machines after the expiration date if the applicant's license renewal has not been issued unless the applicant is notified by the comptroller prior to the license expiration date of a problem with the license renewal.

(3) The annual license fee must be submitted with a license renewal application. License fees may not be prorated.

(4) Late-filed application for license renewal. If an application for renewal of an unexpired license is postmarked December 1 - December 31, the applicant must remit a late fee of $50 in addition to the annual license fee listed in subsection (b)(1) of this section.

(5) Application for renewal of an expired license.

(A) A license holder may renew an expired license if it has not been expired for more than 90 days by paying to the comptroller a fee that is 1-1/2 times the amount of the annual license fee listed in subsection (b)(1) of this section.

(B) A license holder may renew an expired license if it has been expired for more than 90 days but less than two years by paying to the comptroller a fee that is two times the amount of the annual license fee listed in subsection (b)(1) of this section.

(C) A person whose license has been expired for two years or more may not renew their license and must comply with the requirements and procedures for obtaining a new license under subsection (b) of this section. In addition to other penalties allowed by law, each person whose license has been expired for two years or more and who has been engaged in business as a general business license holder, import license holder, or repair license holder must remit to the comptroller an amount equal to two times the amount of the annual license fee listed in subsection (b)(1) of this section for each year that the person engaged in business with an expired license.

(d) Annual registration certificate renewals.

(1) Registration certificate renewal applications are due November 30. Registration certificate renewal applications will not be processed unless the tax due and the registration fee are remitted. Registration certificate renewal applications filed after the due date may result in the renewal registration certificate being issued after December 31, the expiration date of the existing registration certificate. In such a case, a person may not exhibit or display coin-operated amusement machines after the expiration date until the renewal certificate is issued. A person who exhibits or displays coin-operated amusement machines without a registration certificate or with an expired registration certificate is guilty of a Class A misdemeanor.

(2) An applicant who properly completes the registration certificate renewal application and remits all fees and taxes with it by the due date may continue to exhibit or display coin-operated amusement machines after the expiration date even if the registration certificate renewal has not been issued, unless the applicant is notified by the comptroller prior to the registration certificate expiration date of a problem with the registration certificate renewal.

(3) Registration certificate fees may not be prorated and the registration fee must be submitted with the registration certificate renewal application.

(4) Late-filed application for registration certificate renewal. If an application for renewal of an unexpired registration certificate is postmarked December 1 - December 31, the applicant must remit a late fee of $50 in addition to the annual registration certificate fee listed in subsection (b)(1) of this section.

(5) Application for renewal of an expired registration certificate.

(A) A registration certificate holder may renew an expired registration if it has not been expired for more than 90 days by paying to the comptroller a fee that is 1-1/2 times the amount of the annual registration fee listed in subsection (b)(1)(F) of this section.

(B) A registration certificate holder may renew an expired registration if it has been expired for more than 90 days but less than two years by paying to the comptroller a fee that is two times the amount of the annual registration fee listed in subsection (b)(1)(F) of this section.

(C) A person whose registration has been expired for two years or more may not renew their registration and must comply with the requirements and procedures for obtaining a new registration certificate under subsection (b) of this section. In addition to other penalties allowed by law, each person whose registration has been expired for two years or more and who has been engaged in business as a registration certificate holder must remit to the comptroller an amount equal to two times the amount of the annual registration fee listed in subsection (b)(1) of this section for each year that the person engaged in business with an expired registration.

(e) Occupation tax permits.

(1) Occupation tax. Each coin-operated amusement machine that an owner exhibits, displays, or permits to be exhibited or displayed in this state is subject to an annual occupation tax. With the exception of annual renewals, the occupation tax is due at the time the owner exhibits or displays the machine, or permits the machine to be exhibited or displayed, in this state. The occupation tax for annual renewals for each machine exhibited or displayed or permitted to be exhibited or displayed in this state is due November 30 of each year. The purchase of a tax permit is payment of the occupation tax.

(2) Tax rate. The tax rate is $60 per year. When a coin-operated amusement machine is first exhibited or displayed or permitted to be exhibited or displayed in this state, the occupation tax for the calendar year is prorated as follows:

(A) for a tax permit issued January 1 to March 31, the amount of tax is $60;

(B) for a tax permit issued April 1 to June 30, the amount of tax is $45;

(C) for a tax permit issued July 1 to September 30, the amount of tax is $30; and

(D) for a tax permit issued October 1 to December 31, the amount of tax is $15.

(3) Replacement of lost, stolen, or destroyed valid occupation tax permits. The comptroller shall provide a duplicate tax permit if a valid tax permit has been lost, stolen, or destroyed. The fee for each duplicate tax permit is $5.00. If a valid tax permit is lost, stolen, or destroyed, a written statement must be submitted explaining the circumstances by which the tax permit was lost, stolen, or destroyed, and must include the number of the lost, stolen, or destroyed tax permit before a replacement tax permit can be issued. A tax permit for which a duplicate permit has been issued is void.

(4) Assignment of tax permits. Each coin-operated amusement machine exhibited or displayed in Texas for music, skill, or pleasure shall be registered with the comptroller by make, model, and serial number. A tax permit issued by the comptroller shall be affixed to each registered machine. Each coin-operated amusement machine shall have a serial number, and the name and telephone number of the owner of each machine must be clearly visible on the outside surface of the machine. If a coin-operated machine is not manufactured with a serial number, a license holder or registration certificate holder shall assign a serial number to the machine and either stamp or engrave the assigned number on the machine cabinet. If all these requirements have been met, a tax permit may be assigned to a purchaser by submitting written notice, as described in subsection (b)(4) of this section, to the comptroller within 10 days of the transfer of title or possession of a coin-operated amusement machine.

(5) Attachment of tax permits. Tax permits shall be conspicuously affixed to any permanent surface of the coin-operated amusement machine to make the tax permit visible for inspection without movement of the machine. Tax permits shall be securely and completely affixed to the coin-operated amusement machine so they cannot be removed without continued application of steam and water. Tax permits shall be completely affixed to a permanent surface of the coin-operated amusement machine by use of the adhesive exposed on the back of the tax permit following complete removal of the protective backing. It is unlawful to enclose any tax permit in a plastic cover, or on a removable cover made of plastic, metal, or any other material, or to in any way affix the tax permit in a less than permanent manner so the tax permit can be removed or moved from one machine to another without the destruction of the tax permit resulting as a consequence of such removal. Tax permits shall not be affixed by the use of tape. Tax permits are not transferrable from one person to another or from one machine to another, and cannot be affixed to a machine that has not been registered with the comptroller.

(6) Invalid tax permits.

(A) Any tax permit not properly displayed as described in paragraph (5) of this subsection is invalid. Any tax permit not affixed to a permanent surface of a coin-operated amusement machine as described in paragraph (5) of this subsection by use of the adhesive backing on the permit is invalid. Any tax permit removed from a coin-operated amusement machine is invalid.

(B) The comptroller will not issue a duplicate tax permit to replace a tax permit that is invalid. A new tax permit must be purchased to replace an invalid tax permit.

(C) The comptroller may assess a penalty of not less than $50 or more than $2,000 against an owner who permits a coin-operated amusement machine under the owner's control to be operated, exhibited, or displayed in this state without a valid tax permit or against a person who exhibits or displays a coin-operated amusement machine in this state without a valid tax permit. The comptroller may assess a penalty for each day a violation occurs.

(7) Issuance of extra tax permits. The comptroller will issue tax permits only for coin-operated amusement machines that are exhibited or displayed on location. The owner shall not stockpile permits or attach tax permits to unregistered machines.

(f) Exemptions.

(1) Establishing an exemption. In order to establish that an organization is exempt from the license requirements pursuant to Occupations Code, §2153.005 (Exempt Corporations and Associations), the organization must do the following:

(A) submit a written statement to the comptroller explaining in detail the nature of the activities conducted or to be conducted, a copy of the articles of incorporation if the organization is a corporation, a copy of the bylaws, a copy of any applicable trust agreement or a copy of its constitution, and a copy of any letter granting exemption from the Internal Revenue Service; and

(B) furnish any additional information requested by the comptroller including, but not limited to, documentation showing all services performed by the organization and all income, assets, and liabilities of the organization.

(2) Written notice. After a review of the material, the comptroller will inform the organization in writing if it qualifies for an exemption.

(3) Private ownership exemption. An individual who owns a coin-operated amusement machine for personal use in the individual's private residence is not required to obtain a license or pay a tax under this section.

Source Note: The provisions of this §3.602 adopted to be effective December 17, 1996, 21 TexReg 11808; amended to be effective April 13, 2005, 30 TexReg 2097; amended to be effective June 4, 2020, 45 TexReg 3635