HB 2229 Text

H. B. 2229

(By Delegates Fleischauer,
Hubbard,
Proudfoot and Douglas)

[Introduced February 15, 2001 ; referred to the

Committee on the Judiciary then Finance.]

A BILL to amend chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new article, designated article fifteen-b, relating generally to consumers sales and service tax; providing for remote audit of gross proceeds of coin-operated machines for compliance with consumers sales and service tax and stating legislative finding and purpose; defining certain terms; requiring annual registration of coin-operated machines; imposing registration fees; permitting temporary registration and imposing temporary registration fees; requiring evidence of registration to be affixed; specifying exceptions to registration; providing consequences for failure to register, imposing civil administrative penalties and criminal penalties in specified circumstances; providing for enforcement of registration and remote audit requirements; authorizing the tax commissioner to propose administrative rules; providing that enactment does not legalize automatic payoff mechanisms or legalize use of coin-operated machines, devices or apparatuses for unlawful gaming purposes; establishing special revenue funds; providing for severability; specifying implementation rules; and providing effective date.

Be it enacted by the Legislature of West Virginia:

That chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article fifteen-b, to read as follows:
ARTICLE 15B. REGISTRATION AND AUDITING OF COIN-OPERATED MACHINES OFFERING AMUSEMENTS AND OTHER SERVICES.
§11-15B-1. Legislative finding and purpose.

(a) Finding. -- The Legislature finds that when amusements and other services are sold through coin-operated machines, devises and apparatuses, the tax commissioner has no efficient and effective way to audit or verify the accuracy of consumers sales and service tax returns filed by the owners and operators of these coin- operated machines, devices and apparatuses.

(b) Purpose. -- The purpose of this article is to facilitate and enforce compliance with requirements of article fifteen of this chapter which impose on owners and operators of coin-operated machines, devices and apparatuses offering an amusement or other service a duty to collect and pay over to the tax commissioner the amount of consumers sales and service tax computed by applying the applicable rate of tax against the gross receipts of each coin-operated machine, device and apparatus offering an amusement or other service.
§11-15B-2. Definitions.

As used in this article:

(a) "Coin-operated machine, device or apparatus offering amusement" includes any machine, device or apparatus that provides amusement, diversion or entertainment that is coin-operated. This includes, but is not limited to, coin-operated arcade games, coin-operated video games, coin-operated pool tables, coin-operated foosball tables, coin-operated air hockey games, coin-operated soccer games, coin-operated kiddy rides, coin-operated jukeboxes, coin-operated crane machines, coin-operated bowling machines, coin-operated video poker machines.

(b) "Coin-operated machine, device or apparatus offering other services" includes any machine, device or apparatus that provides any service that is not an amusement and is coin-operated, but does not include any coin-operated machine, device or apparatus that sells tangible personal property for fair market value or is located in a building used exclusively for residential purposes, to the exclusion of any and all commercial activity.

(1) Any machine, device or apparatus that is operated by placing through a slot or any kind of opening or container, any coin, slug, token or other object or article necessary to be inserted before the machine operates or functions; and

(2) Any machine, device or apparatus that is operated by inserting United States currency, the currency of any other nation, a credit or debit card, smart card, other similar purpose card or other item that represents money or other medium of exchange.

(d) "Decal" means the sticker issued by the tax commissioner to show proof of payment of the annual or temporary registration fee imposed by this article that must be affixed to each coin-operated machine, device or apparatus offering an amusement or other service in this state.

(e) "Gross proceeds" means the amount received in money, credits, property or other consideration from sales and services within this state, without deduction on account of any costs or expenses.

(f) "Operator" means any person who exhibits, displays or permits to be exhibited or displayed in this state, other than in the person's own place of business, a coin-operated machine, device or apparatus offering an amusement or other service for the purpose of generating gross proceeds.

(g) "Owner" means any person who owns or leases a coin-operated machine, device or apparatus offering an amusement or other service in this state.

(h) "Place of business" means any place in this state where a coin-operated machine, device or apparatus offering an amusement or other service is located for purposes of generating gross proceeds.

(i) "Person" means and includes any individual, association, corporation, small business corporation, partnership, limited partnership, joint venture, limited liability company or any other group or combination acting as a unit, the state of West Virginia, county, municipal corporation or other political subdivision of this state, receiver, trustee, fiduciary or trade association.

(j) "Registration fee" means the annual registration fee imposed by section four of this article, the temporary registration fee imposed by section five of this article and the civil administrative penalties imposed by section ten of this article.
§11-15B-3. Registration of coin-operated machines, devices and apparatuses offering amusements and other services.

(a) Registration required. -- Except as provided in subsection (b) of this section, no person may own or operate a coin-operated machine, device or apparatus offering an amusement or other service unless the machine, device or apparatus is registered as provided in section four or five of this article and the applicable registration fee has been paid.

(b) Exception. -- Registration is not required for a machine, device, or apparatus that is exempt from application of this article as provided in section eight of this article.

(c) Notification of purchase or lease of coin-operated machine, device or apparatus offering amusement or other service. -- Within ten days of the date of purchase, lease, rental or license to use any coin-operated machine, device or apparatus offering an amusement or other service, the owner shall furnish the tax commissioner with a copy of the invoice or lease agreement or other agreement, showing the description and serial number of the coin- operated machine, device or apparatus. Before the coin-operated machine, device or apparatus is placed in service or use at its intended location the owner must fully comply with the requirements of this article.
§11-15B-4. Annual registration and fee.

(a) Annual registration fee. -- For the privilege of owning or operating a coin-operated machine, device or apparatus offering an amusement or other service, the owner or operator of the coin-operated machine, device or apparatus shall pay an annual registration fee for each machine, device or apparatus registered with the tax commissioner, except as provided in sections five and eight of this article.

(b) Application for registration. -- An application for initial registration and an application for renewal of annual registration shall be in the form or forms prescribed by the tax commissioner and shall include all information required by the tax commissioner.

(1) The initial registration fee is three hundred dollars for each coin-operated machine, device or apparatus offering an amusement or other service registered with the tax commissioner by its owner or operator after the effective date of this section.

(2) The annual renewal of registration fee is one hundred dollars for each coin-operated machine, device or apparatus offering an amusement or other service.

(d) Registration decal. -- When the applicable registration fee is paid, the tax commissioner shall provide the applicant with a separately numbered decal or other indicia, designed by the tax commissioner, evidencing payment of the initial registration fee or payment of the annual renewal registration fee, as appropriate, for each machine, device or apparatus listed in the application.

(e) Period of registration. -- The registration period is twelve months beginning with the first day of the month in which the decal or other indicia of registration is issued by the tax commissioner, or the first day of the first month of the period for which the decal or indicia of registration is issued by the tax commissioner, at the election of the applicant, as stated in the application. No decal or other indicia of registration may be issued under this section for a period of less than twelve consecutive months.

(f) Change of ownership. -- When ownership of a registered coin-operated machine, device or apparatus offering an amusement or other service is transferred to another person, the registration in the name of the former owner becomes void as of the date of the sale or the date possession transfers, whichever first occurs. The new owner must reregister the machine, device or apparatus and pay the initial registration fee if the machine, device or apparatus will be used in this state.

(g) Modification of machine, device or apparatus. -- When a coin-operated machine, device or apparatus is so modified that it is a different machine, device or apparatus than that previously registered with the tax commissioner, the machine, device or apparatus must be reregistered with the tax commissioner and the initial registration fee again paid. The tax commissioner shall promulgate rules in accordance with the provisions of article three, chapter twenty-nine-a of this code, specifying when a modified coin-operated machine, device or apparatus will be treated as a new machine, device or apparatus for purposes of registration under this article.

(h) Refund or credit. -- No refund or credit may be given if the decal or other indicia of registration is surrendered, destroyed or lost before expiration of the period for which it was issued.

§11-15B-5. Temporary registration for carnivals, fairs, festivals, etc.

(a) Temporary registration. -- If a coin-operated machine, device or apparatus offering an amusement or other service is operated or will be used in this state for not more than thirty days, the owner or operator may apply to the tax commissioner for issuance of a temporary registration decal or other indicia of temporary registration for each such coin-operated machine, device or apparatus in lieu of applying for an annual registration under section four of this article: Provided, That an applicant may not file more than three applications for temporary registration during any consecutive twelve-month period.

(b) Limitation. -- When the machine, device or apparatus will be used in this state for more than thirty days during any consecutive twelve-month period, temporary registration is not allowed under this section.

(c) Application. -- The application for temporary registration shall be in the form prescribed by the tax commissioner and shall include all information required by the tax commissioner.

(d) Temporary registration fee. -- The registration fee for a temporary registration is two dollars per day, for each day of the temporary registration period: Provided, That no temporary registration may be for a period of less than five consecutive days nor for more than thirty days during any consecutive twelve-month period, for each coin-operated machine, device or apparatus offering an amusement or other service for which temporary registration is sought.

(e) Temporary registration decal. -- The tax commissioner shall provide the applicant with a separately numbered decal or other indicia of temporary registration designed by the tax commissioner evidencing payment of the temporary registration fee for each machine, device or apparatus listed in the application that is or will be used in this state during the temporary registration period.
§11-15B-6. Evidence of payment of registration fee to be affixed.

The decal or other indicia evidencing registration prescribed by the tax commissioner, whether for an annual or temporary registration, shall be: (1) Securely attached to the side or front of the coin-operated machine, device or apparatus for which it is issued; (2) properly protected; and (3) plainly visible at all times while the machine, device or apparatus is available to users. Every coin-operated machine, device or other apparatus offering an amusement or other service shall also bear on the side or front, so as to be plainly visible, the name and address of the person in whose name the machine, device or apparatus is registered.

§11-15B-7. Audit of coin-operated machines, devices and apparatuses offering amusements or other services.

(a) Additional audit authority. -- In addition to the tax commissioner's powers set forth in article ten of this chapter, the tax commissioner may require owners and operators of coin-operated machines and devices offering amusements or other services to install a pulse meter or other attachment or device approved by the tax commissioner that accounts for the gross receipts of each coin-operated machine, device or apparatus and to require owners and operators of such coin-operated machines, devices or apparatuses to establish and maintain telecommunications links with each pulse meter, attachment or device, whether by wire or cellular telephone, that allows the tax commissioner to download the gross receipts of each coin-operated machine, device or apparatus offering an amusement or other service.

(b) De minimis collections. -- When in the opinion of the tax commissioner the gross proceeds of a coin-operated machine, device or apparatus during a registration period will under all reasonable sets of facts and circumstances be less than one thousand dollars, the tax commissioner may, in his or her discretion, waive the remote audit requirement of this section.

(c) Notification of disconnection. -- When a coin-operated machine, device or apparatus offering an amusement or other service will be disconnected from the statewide network for any reason except power failure or natural disaster, the owner or operator must give the tax commissioner five days' advanced written notice of the disconnection unless, by rule, the tax commissioner prescribes the circumstances under which the commissioner consents to a shorter period of notification.

(d) Notification of relocation. -- When the owner or operator of a coin-operated machine, device or apparatus offering an amusement or other service moves the machine, device or apparatus to a new physical location, the owner or operator must apply to the tax commissioner for issuance of a new registration decal or other indicia evidencing registration under this article and pay a new initial registration fee for the machine, device or apparatus moved to a new physical location. The current registration is void when the machine, device or apparatus is disconnected from the statewide remote audit network and moved to a new physical location. The tax commissioner may promulgate rules as provided in article three, chapter twenty-nine-a of this code to clarify or explain application of this subsection (d).
§11-15B-8. Exceptions.

This article does not apply to:

(1) A coin-operated machine, device or apparatus operated under the jurisdiction of the West Virginia lottery commission;

(2) A coin-operated machine, device or apparatus offering an amusement or other service owned by an individual, located in a building used exclusively for residential purposes by the owner or lessee to the exclusion of any and all commercial purposes, and used solely for the entertainment of the individual who owns the machine, device or apparatus and his or her family and friends; and

(3) A coin-operated machine, device or apparatus used exclusively to sell tangible personal property, such as soft drinks, candy and other snack foods or newspapers.
§11-15B-9. Failure to pay registration fee.

(a) In general. -- In the event the owner or operator of any coin-operated machine, device or apparatus offering an amusement or other service refuses, neglects or fails to pay the registration fee due upon the coin-operated machine, device or apparatus, then the proprietor or owner of the business conducted in the place where the machine, device or apparatus is installed, operated or maintained is liable for payment of the registration fee for that machine, device or apparatus.

(b) Failure to register. -- If the proprietor or owner of the business conducted in the place where an unregistered coin-operated machine, device or apparatus offering an amusement or other service is installed, operated or maintained refuses, neglects or fails to pay to the tax commissioner the applicable registration fee, any law-enforcement officer in this state or any authorized employee of the tax commissioner or the alcohol beverage control commissioner may impound the unregistered coin-operated machine, device or apparatus offering an amusement or other service by taking it into his or her possession until the applicable registration fee plus any applicable penalties and costs of impoundment are paid. If the amount due is not paid within ten days after the machine, device or apparatus is impounded, the machine, device or apparatus shall be turned over to the sheriff of the county in which it was seized who shall then forthwith sell it in the same manner as provided by law for the sale of personal property for delinquent property taxes. Proceeds from the sale shall be used to discharge and pay the registration fee due on the unregistered machine, device or apparatus, the sheriff's costs of sale, costs of impoundment of the unregistered machine, device or apparatus, and any civil penalties or other fees due the tax commissioner. The balance, if any, is forfeited to the state.

(c) Definition of "impound." -- As used in this section, the term "impound" means taking physical possession of the coin-operated machine, device or apparatus or sealing it in a manner that will prevent its full operation.

(d) Deposit. -- Amounts forfeited to the state under this section shall be deposited into the general school fund.
§11-15B-10. Civil administrative penalty.

(a) In general. -- Any person who offers or makes available to users a coin-operated machine, device or apparatus offering an amusement or other service without obtaining the registration decal or other indicia required by this article shall, in addition to paying the applicable registration fees, pay a civil administrative penalty equal to fifty dollars a day for each day or fraction of a day the machine, device or apparatus is in operation or service in violation of this article. If the person owns or operates more than one unregistered coin-operated machine, device or apparatus offering an amusement or other service in this state, the civil administrative penalty is fifty dollars per day multiplied by the number of unregistered coin-operated machines, devices or apparatuses offering an amusement or other service owned or operated by the person in this state.

(b) Deposit of penalty. -- The amount of civil penalties imposed by this section shall be deposited, accounted for and expended like the registration fees imposed by this article.
§11-15B-11. Criminal penalties.

(a) In general. -- Any person who violates any provision of section four or five of this article is guilty of a misdemeanor and, upon conviction thereof, shall be fined one thousand dollars. Each day or part of a day that any violation continues constitutes a distinct and separate offense and is punishable accordingly.

(b) Unregistered machine, device or apparatus. -- Any person who owns or operates in this state more than one unregistered coin-operated machine, device or apparatus offering an amusement or other service is guilty of a misdemeanor and, upon conviction thereof, shall be fined five thousand dollars for each unregistered coin-operated machine, device or apparatus offering an amusement or other service. Each day or part of a day that this violation continues constitutes a distinct and separate offense and is punishable accordingly.

(c) Removal of decal. -- No person other than the owner or operator of the coin-operated machine, device or apparatus registered under this article may intentionally remove a current decal or other indicia of registration under this article. Any person who violates this subsection (c) is guilty of a misdemeanor and, upon conviction, shall be fined not less than twenty-five dollars nor more than one hundred dollars plus costs.

(d) Breaking of impound seal. -- When a coin-operated machine, device or apparatus is impounded under section nine of this article by sealing it, whoever breaks the seal affixed, as provided in section nine of this article, without the tax commissioner's approval is guilty of a misdemeanor and, upon conviction, shall be fined not less than fifty dollars nor more than one thousand dollars plus costs.

(e) Remote audit. -- Any person who owns or operates a coin-operated machine, device or apparatus offering an amusement or other service in violation of section seven of this article is guilty of a misdemeanor and, upon conviction, shall, for a first offense, be fined one hundred dollars for each day or fraction of a day the violation continues for each machine, device or apparatus operated in violation of this section.

(1) For a second offense under this subsection (e), the monetary fine is two hundred dollars for each day or fraction of a day the violation continues for each machine, device or apparatus operated in violation of this section.

(2) For a third offense under this subsection (e), the monetary fine is five hundred dollars for each day or fraction of a day the violation continues for each machine, device or apparatus operated in violation of this section.

(3) For a fourth offense and each succeeding offense under this subsection (e), the monetary fine is one thousand dollars for each day or fraction of a day the violation continues for each machine, device or apparatus operated in violation of this section.

(f) Defeat of remote audit. -- Any person who defeats the remote monitoring by the tax commissioner of the gross proceeds of a coin-operated machine, device or apparatus offering an amusement or other service is guilty of a misdemeanor and, upon conviction thereof, for a first offense, shall be fined one thousand dollars for each coin-operated machine, device or apparatus with respect to which remote monitoring was defeated, for each day the offense continues.

(1) The fine, for conviction for a second offense under this subsection (f), is five thousand dollars for each coin-operated machine, device or apparatus with respect to which remote monitoring was defeated, for each day the offense continues.

(2) The fine, for conviction for a third offense under this subsection (f), is ten thousand dollars for each coin-operated machine, device or apparatus with respect to which remote monitoring was defeated, for each day the offense continues.

(3) The fine, upon conviction for a fourth offense or subsequent offense under this subsection (f), is not less than twenty thousand dollars for each coin-operated machine, device or apparatus with respect to which remote monitoring was defeated, for each day the offense continues, nor more than one hundred thousand dollars for each coin-operated machine, device or apparatus with respect to which remote monitoring was defeated, for each day the offense continues, in the discretion of the court.

(g) Attempt to defeat remote auditing. -- Any person who attempts to defeat the remote monitoring by the tax commissioner of the gross proceeds of a coin-operated machine, device or apparatus offering an amusement or other service is guilty of a misdemeanor and, upon conviction for a first offense, shall be fined twenty thousand dollars.

(1) For a second conviction under this subsection (g), the person shall be fined fifty thousand dollars.

(2) For each subsequent conviction under this subsection (g), the fine is not less than one hundred thousand dollars nor more than one million dollars, in the discretion of the court.
§11-15-12. Enforcement of article.

Complaints for violation of the criminal provisions of this article may be filed in magistrate court or other court having jurisdiction by a county sheriff, any county deputy sheriff, any municipal police officer, any state police officer, any investigator of the alcohol beverage control commissioner and any authorized agent of the tax commissioner.
§11-15B-13. Administrative rules.

The tax commissioner shall propose legislative rules or other rules for promulgation pursuant to article three, chapter twenty-nine-a of this code, necessary to effectuate the purposes and intent of this article.
§11-15B-14. Payoff mechanisms not legalized.

Nothing contained in this article is considered to legalize, authorize, license or permit any machine, device or apparatus to be equipped with any automatic money payoff mechanism or any other machine, device or apparatus to be used for unlawful gaming activity, as defined under applicable federal law or the laws of this state.
§11-15B-15. Special revenue fund.

(a) Registration fees. -- The registration fees collected under this article shall be deposited into a special revenue fund hereby created in the state treasurer's office and known as the "remote audit sales tax fund." The tax commissioner may expend moneys in this fund only for expenses reasonably necessary to implement and execute the requirements of this article: Provided, That beginning the first day of July, two thousand three, no moneys may be paid from this fund except as appropriated by the Legislature.

(b) Consumers sales tax. -- Fifteen percent of the tax imposed by article fifteen of this chapter and collected on the gross proceeds of coin-operated amusement machines, devices and apparatuses shall be deposited into a special revenue fund hereby created in the state treasurer's office and known as the "tax division improvement fund" to provide additional funding to the tax commissioner for administration, audit and enforcement activities under this article and articles nine and ten of this chapter: Provided, That beginning the first day of July, two thousand three, no moneys may be paid from this fund except as appropriated by the Legislature.
§11-15B-16. General procedure and administration.

Every provision of the "West Virginia Tax Procedure and Administration Act" set forth in article ten of this chapter applies to the registration fees and civil administrative penalties imposed by this article, except as otherwise expressly provided in this article, with like effect as if that act were applicable only to the registration fees and civil administrative penalties imposed by this article and were set forth in extenso in this article. For this purpose, wherever the word "tax" is used in article ten of this chapter, it means the registration fee imposed by this article.
§11-15B-17. Severability.

If, for any reason, any section, sentence, clause, phrase or provision of this article, or the application thereof, to any person or circumstance is held unconstitutional or invalid, the unconstitutionality or invalidity does not affect other sections, sentences, clauses, phrases or provisions or their application to any other person or circumstance, and, to this end, every article, section, sentence, clause, phrase or provision of this article is hereby declared to be severable.
§11-15B-18. Effective date; implementation rules.

(a) Effective date. -- This article shall take effect the first day of July, two thousand one.

(b) Implementation of registration. -- All coin-operated machines, devices or apparatuses offering an amusement or other service that are located in this state on the effective date of this act of the Legislature shall be registered with the tax commissioner within one hundred twenty days after the effective date of this article. At the time an application for registration is submitted, the applicant shall pay the registration fee imposed by this article for each coin-operated machine, device or apparatus included in the application. The twelve-month registration period begins the first day of July, two thousand one, the first day of the month in which the application for registration is submitted or the first day of the calendar month specified in the decal or other indicia of registration issued by the tax commissioner, whichever is the later.

(c) Implementation of remote audit program. -- As soon as practicable, the tax commissioner shall begin to establish, implement and maintain a statewide system to remote audit coin-operated machines, devices and apparatuses offering an amusement or other service. The Legislature recognizes that it will take time, money and other resources to complete this system and that the system can be built only as funds are available for that purpose. The tax commissioner shall design a plan for the orderly construction and implementation of this statewide system. The tax commissioner may implement this system: (1) On a county-by-county basis; (2) by first connecting coin-operated machines, devices or apparatuses located in clubs licensed under article seven, chapter sixty of this code, then establishments with Class-A nonintoxicating beer licenses issued under article sixteen of this chapter and then other business establishments; (3) by any combination of items (1) and (2) or (4) by any other plan determined by the tax commissioner to be reasonable based upon the availability of funding and other resources for implementation of this article.

NOTE: The purpose of this bill is to allow the Tax Commissioner to remote audit the gross receipts of coin-operated machines, devices and apparatuses that offer an amusement or other service to determine whether or not the operator of the machine, device or apparatus is remitting consumers sales and service tax on the entire gross receipts of each machine, device or apparatus that offers an amusement or other service. To facilitate the identification and location of these machines, devices and apparatuses, this bill requires that they be registered with the Tax Commissioner and have affixed annual or temporary indicia of registration issued by the Tax Commissioner. To fund development of the remote audit program, registration fees are imposed and fifteen percent of tax collected on gross receipts of coin-operated amusement machines, devices and apparatuses ascertained through the remote audit program is dedicated to that program and administration, audit and enforcement activities of the Tax Division.

This article is new, therefore, strike-throughs and underscoring are omitted.

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