317 Ga. 288 FINAL COPY
S22G1247. FUNVESTMENT GROUP, LLC v. CRITTENDEN.
LAGRUA, Justice.
We granted certiorari in this case to decide whether revenue
generated from the lease of a bona fide coin operated amusement
machine (“COAM”) qualifies as “gross revenues” exempt from
taxation under OCGA § 48-8-3 (43).1 Funvestment Group, LLC
(“Funvestment”), the lessee of the COAMs at issue and the owner of
the location where the COAMs are available for play, argues that
revenues generated from the lease of COAMs are considered “gross
revenues” exempt from sales and use tax. The Court of Appeals
concluded that the subject lease revenues are not “gross revenues”
————————————————————— 1 OCGA § 48-8-3 (43) provides:
The sales and use taxes levied or imposed by this article shall not apply to: . . . [g]ross revenues generated from all bona fide coin operated amusement machines which vend or dispense music or are operated for skill, amusement, entertainment, or pleasure which are in commercial use and are provided to the public for play which will require a permit fee under Chapter 27 of Title 50[.]
1 and that the exemption only applies to money inserted into COAMs
for play. See Funvestment Group v. Crittenden, 364 Ga. App. 447,
452 (1) (a) (875 SE2d 436) (2022). For the reasons that follow, we
conclude that the Court of Appeals erred in reaching this conclusion,
and we thus reverse the judgment of the Court of Appeals.
1. Pertinent Facts and Procedural History
Funvestment owns and operates an amusement facility in
Norcross, Georgia, that contains an arcade room, party rooms for
group events, a restaurant, an indoor driving track, and a computer
lab equipped with touchscreen computers and simulators on which
children can learn about driving safety. Some of the equipment used
at Funvestment’s facility, including arcade games, toy cars, and a
train, are classified as COAMs.
Funvestment leases the COAMs from Tiny Towne
International, Inc. (“Tiny Towne”), pursuant to a Location Rental
Agreement. In accordance with that agreement and as payment for
leasing the COAMs, Funvestment agreed to pay Tiny Towne “[ten]
2 percent of the total gross revenue after deductions for state master
license, state sticker fees, and refunds and [ten] percent of other
gross income generated by [Funvestment’s] business.”2 As discussed
in more detail below, Funvestment’s lease payments to Tiny Towne
would ordinarily be subject to sales and use taxes under OCGA § 48-
8-30 (d) (1). However, because OCGA § 48-8-3 (43) provides that
“[g]ross revenues generated from bona fide coin operated
amusement machines” are exempt from sales and use taxes,
Funvestment and Tiny Towne contend they were not required to pay
and remit sales and use taxes on the revenues generated by
Funvestment’s lease of the COAMs to the Georgia Department of
Revenue (“DOR”). In May 2016, following a routine audit, the DOR
issued a proposed assessment to Funvestment to collect the value of
these unpaid taxes.
————————————————————— 2 The record reflects that all of the COAMs at Funvestment’s facility have
been registered with the Georgia Lottery Corporation and that Tiny Towne and Funvestment have paid for and obtained the requisite licenses and permits from the State to own and operate those machines. 3 Funvestment appealed the proposed assessment to the DOR,
asserting that the revenues generated from the lease of the COAMs
were exempt from sales and use tax under OCGA § 48-8-3 (43).
Following a hearing, the DOR issued a decision concluding that the
exemption in OCGA § 48-8-3 (43) did not apply to the income
generated from Funvestment’s lease of the COAMs because the
statute contemplated only an exemption from tax on the
“participation transaction” — i.e., from the actual play of the COAM
by a person who has placed “a coin, or its equivalent” into the
machine.
Funvestment appealed to the Georgia Tax Tribunal, which
agreed with Funvestment’s interpretation of OCGA § 48-8-3 (43).
Relying on Telecom*USA, Inc. v. Collins, 260 Ga. 362 (393 SE2d 235)
(1990) and Ga. Dept. of Revenue v. Owens Corning, 283 Ga. 489 (660
SE2d 719) (2008), the Tax Tribunal concluded that OCGA § 48-8-3
(43) was clear, and pursuant to the clear language of that statute,
“[t]he General Assembly unambiguously exempted all gross
4 revenues generated from COAMs for sales and use tax purposes,”
including revenues generated from lease payments. On this basis,
the Tax Tribunal ruled that Funvestment was not obligated to pay
sales and use tax on its lease payments to Tiny Towne as required
by the proposed assessment.
The DOR appealed to the Superior Court of Fulton County,
which reversed the Tax Tribunal, concluding that revenues
generated from the lease of COAMs are not included in the
exemption provided by OCGA § 48-8-3 (43). After granting
Funvestment’s discretionary application, the Court of Appeals
affirmed the superior court, concluding that (1) the statute required
that “the contemplated gross revenues” be “generated from” the
playing of the actual COAMs, and (2) Funvestment’s position failed
to accord with “well-settled standards for reviewing taxation
statutes” — namely, the standard found in Owens Corning,
providing that “‘[t]axation is the rule, and exemption from taxation
is the exception.’” Funvestment, 364 Ga. App. at 451 (1) (a) (quoting
5 Owens Corning, 283 Ga. at 489). After determining that the “words
of the statutory provision are plain,” id. at 455 (1) (b) (iii), the Court
of Appeals held that
[t]he plain language of the exemption [in OCGA § 48-8-3 (43)] means that the COAM itself must generate the revenue by vending or dispensing music or public play by inserting money. Because the leases do not constitute remuneration for vending or dispensing music or public play, the exemption clearly applies only to the money inserted into the COAMs for play, not leases of the COAMs themselves.
Id. at 449 (punctuation omitted; emphasis in original).
We granted certiorari to address the following questions: (1)
whether the Court of Appeals was correct to hold that the sales tax
exemption under OCGA § 48-8-3 (43) does not apply to
Funvestment’s lease payments to Tiny Towne because such
payments are not “[g]ross revenues generated from” COAMs; (2)
whether, under OCGA § 48-8-3 (43), revenues must be generated by
participation-plays of the machines to be exempted; (3) whether the
funds must be the “revenue” of the taxpayer in order to qualify for
the exemption under OCGA § 48-8-3 (43), whether the subject lease
6 payments in this case are “revenue” belonging to Funvestment, as
opposed to an expense, and whether that makes any difference in
the analysis; and (4) how apparently competing interpretive
presumptions regarding tax statutes might bear on the meaning of
statutory provisions at issue in this case — compare, e.g., Owens
Corning, 283 Ga. at 489 with Telecom*USA, 260 Ga. at 363 (1).
2. Legal Backdrop
(a) COAMs
COAMs are defined by statute as
. . . every machine of any kind or character used by the public to provide amusement or entertainment whose operation requires the payment of or the insertion of a coin, bill, other money, token, ticket, card, or similar object and the result of whose operation depends in whole or in part upon the skill of the player, whether or not it affords an award to a successful player[.]
OCGA § 50-27-70 (b) (2) (A). “The term also means a machine of any
kind or character used by the public to provide music whose
operation requires the payment of or the insertion of a coin, bill,
other money, token, ticket, card, or similar object such as jukeboxes
7 or other similar types of music machines.” Id. There are two classes
of COAMs — Class A machines and Class B machines. See OCGA §
50-27-70 (b) (3) and (4). The COAMs at issue in this appeal are Class
A machines.3
Our General Assembly has enacted legislation extensively
regulating the COAM industry in this State. See OCGA § 50-27-70
et seq. See also Gebrekidan v. City of Clarkston, 298 Ga. 651, 656-
657 (3) (a) (784 SE2d 373) (2016) (“[T]he statutory scheme
[regulating COAMs], which is now administered by the Georgia
Lottery Corporation [ ], is extensive.”). In accordance with those
regulations and as a condition of operation, all COAMs, COAM
owners, location owners, and locations where COAMs are available
for play must be licensed by the Georgia Lottery Commission
————————————————————— 3 A “Class A machine” is defined as “a bona fide coin operated amusement
machine” which “does not allow a successful player to carry over points won on one play to a subsequent play or plays” and “[p]rovides no reward to a successful player” — instead rewarding a successful player only with “free replays or additional time to play,” “noncash merchandise,” “points, tokens, tickets, or other evidence of winnings” that may be exchanged for noncash merchandise, or “any combination” thereof. OCGA § 50-27-70 (b) (3) (A)-(E). 8 (“GLC”). See OCGA § 50-27-70 (a). More specifically, all location
owners, like Funvestment, and COAM owners, like Tiny Towne, are
required to pay an annual license fee to the GLC to obtain a location
license and a master license, respectively. See OCGA §§ 50-27-70 (b)
(6) and (7) and 50-27-71 (a.1) (requiring location license fees for
location owners, who are defined in OCGA § 50-27-70 (b) (8) as the
“owner or operator of a business where one or more [COAMs] are
available for commercial use and play by the public”); OCGA §§ 50-
27-70 (b) (10) and (13) and 50-27-71 (a) (requiring master license
fees for COAM owners, who are defined in OGCA § 50-27-70 (b) (13)
as “any person, individual, firm, company, association, corporation,
or other business entity owning a [COAM] in this state”).
Additionally, master license holders — i.e., COAM owners — must
pay a permit fee and receive a “sticker” or “decal” for each COAM,
showing “proof of payment of the permit fee.” OCGA §§ 50-27-70 (b)
(14), (18); 50-27-78. On appeal, Funvestment asserts that this
COAM-licensing fee structure was established by the General
9 Assembly to replace the system of collecting revenue by levying sales
and use taxes on COAM-generated revenues. See OCGA § 50-27-70
(a).4
(b) Sales and use tax
In 1951, the General Assembly enacted the “Retailers’ and
Consumers’ Sales and Use Tax Act,” see Ga. L. 1951, p. 360, which
authorized the levy and collection of a general sales and use tax, now
codified at OCGA § 48-8-1 et seq.
It is the intention of the General Assembly in enacting this article to exercise its full and complete power to tax the retail purchase, retail sale, rental, storage, use, and consumption of tangible personal property and the services described in this article except to the extent prohibited by the Constitutions of the United States and of this state and except to the extent of specific exemptions provided in this article.
OCGA § 48-8-1. In furtherance thereof, “[t]here is levied and
imposed a tax on the retail purchase, retail sale, rental, storage, use,
or consumption of tangible personal property and on the services
————————————————————— 4 Amici curiae Georgia Amusement & Music Operators Association and
Georgia Oilmen’s Association submitted helpful briefing in support of Funvestment’s contentions on appeal. 10 described in this article.” OCGA § 48-8-30 (a). “Tangible personal
property” is defined as “personal property that can be seen, weighed,
measured, felt, or touched or that is in any other manner perceptible
to the senses.” OCGA § 48-8-2 (37).
According to these provisions, “[e]very purchaser of tangible
personal property at retail in this state shall be liable for a tax on
the purchase,” which “shall be paid by the purchaser to the
retailer[5] making the sale.” OCGA § 48-4-30 (b) (1). The retailer is
then obligated to “remit the tax” to the Georgia Department of
Revenue (“DOR”), and when the tax is received by the DOR, it “shall
be a credit against the tax imposed on the retailer.” Id.
Similarly, under OCGA § 48-8-30 (d) (1), “[e]very person to
whom tangible personal property in the state is leased or rented
shall be liable for a tax on the lease or rental[.]” “The tax shall be
paid to the person who leases or rents the property by the person to
————————————————————— 5 The “retailer” is defined as “[e]very person making a sale or sales of
tangible personal property at retail.” OCGA § 48-8-30 (b) (1).
11 whom the property is leased or rented.” Id. “A person who leases or
rents property to others” is a “dealer,” and the dealer is required to
collect the sales and use tax from the person to whom the property
has been leased or rented and “remit the tax” to the DOR. Id.
Pursuant to these provisions, leases of COAMs — including
Funvestment’s lease of the COAMs at issue here — would ordinarily
be subject to sales and use tax unless an exemption or exception
applies.
3. Analysis
In OCGA § 48-8-3, the General Assembly has exempted certain
sales and transactions involving tangible personal property from the
imposition of sales and use taxes, to include the sales tax exemption
at issue in this case relating to COAMs, which was enacted in 1992.
See OCGA § 48-8-3 (43) (“The sales and use taxes levied or imposed
by this article shall not apply to: . . . [g]ross revenues generated from
all bona fide coin operated amusement machines[.]”). On appeal,
Funvestment contends that the exemption in OCGA § 48-8-3 (43)
12 clearly applies to leases of COAMs; that the term “gross revenues”
includes the “leased income” a dealer or COAM owner receives from
a person to whom a COAM has been leased; and that, since the
enactment of this exemption in 1992, the General Assembly has
consistently maintained and applied it to revenues generated from
both the participation plays and leases of COAMs.
(a) Statutory construction
To determine whether the sales tax exemption under OCGA §
48-8-3 (43) applies to revenues generated from the lease of COAMs,
we must begin our analysis with the wording of the statute itself. As
noted above, OCGA § 48-8-3 (43) provides:
The sales and use taxes levied or imposed by this article shall not apply to: . . . [g]ross revenues generated from all bona fide coin operated amusement machines which vend or dispense music or are operated for skill, amusement, entertainment, or pleasure which are in commercial use and are provided to the public for play which will require a permit fee under Chapter 27 of Title 50.
“When construing a statute, we must presume that the General
Assembly meant what it said and said what it meant.” Bell v.
13 Hargrove, 313 Ga. 30, 32 (2) (867 SE2d 101) (2021) (citation and
punctuation omitted). “Accordingly, we afford the statutory text its
plain and ordinary meaning, viewing the statutory text in the
context in which it appears, and reading the statutory text in its
most natural and reasonable way, as an ordinary speaker of the
English language would.” Id. (citation and punctuation omitted).
Throughout this litigation, Funvestment has maintained the
position that the plain language of OCGA § 48-8-3 (43) does not limit
the exemption to revenue generated by playing COAMs, and “[t]he
only natural reading of the exemption includes leased income in the
gross revenues.” The Court of Appeals determined that
Funvestment’s position lacked merit because it “disregard[ed] the
express language requiring that the contemplated ‘gross revenues’
were ‘generated from all bona fide coin operated amusement
machines which vend or dispense music or are operated for skill,
amusement, entertainment, or pleasure which are in commercial
use and are provided for public play.’” Funvestment, 364 Ga. App. at
14 450-451 (1) (a) (citation omitted). Noting that “‘[t]axation is the rule,
and exemption from taxation is the exception,’” the Court of Appeals
held that “[t]he statutory provision at issue here, OCGA § 48-8-3
(43), contains no clear and unambiguous expression of an exemption
applicable to [Funvestment’s] lease payments to Tiny Towne.” Id. at
451-452 (quoting Owens Corning, 283 Ga. at 489). On this basis, the
Court of Appeals affirmed the superior court, noting that “[t]he plain
language of the exemption means that the COAM itself must
generate the revenue by vending or dispensing music or public play
by inserting money,” so the exemption “clearly applies only to the
money inserted into the COAMs for play, not leases of the COAMs
themselves.” Id. at 449 (punctuation omitted). We disagree and
conclude that, by its plain terms, OCGA § 48-8-3 (43) covers
revenues generated from the lease of COAMs as well.
“When, as here, statutory text is clear and unambiguous, our
interpretive task begins and ends with the text itself.” Bell, 313 Ga.
at 32 (2) (citation and punctuation omitted). Our analysis largely
15 turns on the meaning of the phrase, “[g]ross revenues generated
from all bona fide coin operated amusement machines.” Neither the
Georgia Public Revenue Code, OCGA § 48-1-1 et seq., nor the
statutes regulating COAMs, see OCGA § 50-27-70 et seq., define
“revenue,” “gross revenue,” or what it means to “generate” gross
revenue. However, when the exemption in OCGA § 48-8-3 (43) was
enacted in 1992, the term “revenue” was commonly defined as “the
total income produced by a given source.” Revenue, New Webster’s
Dictionary (1992). “Gross,” as in “gross income,” was commonly
defined as “consisting of an overall total exclusive of deductions.”
Gross, New Webster’s Dictionary (1992). And “generate” meant “to
bring into existence” or “to be the cause of.” Generate, New Webster’s
Dictionary (1992). Additionally, Black’s Law Dictionary then
defined the term “revenue” as “[g]ross income or receipts” and, in
turn, defined “gross income” as the “[t]otal income from all sources
before deductions, exemptions, or other tax reductions.” Revenue
and Gross Income, Black’s Law Dictionary (6th ed. 1991). Thus, by
16 common usage and legal definition, the term “gross revenues”
includes the “overall total” income from “a given source” or “all
sources.” Revenue and Gross, New Webster’s Dictionary (1992);
Gross Income, Black’s Law Dictionary (6th ed. 1991).
The phrase, “[g]ross revenues generated from all bona fide coin
operated amusement machines,” OCGA § 48-8-3 (43), contains no
words of limitation restricting the manner in which COAMs
generate these revenues, and there are no contextual limitations
provided elsewhere in OCGA § 48-8-3, the rest of the Georgia Public
Revenue Code, OCGA § 48-1-1 et seq., or the statutes regulating
COAMs, see OCGA § 50-27-70 et seq. Moreover, the phrase, “which
vend or dispense music or are operated for skill, amusement,
entertainment, or pleasure which are in commercial use and are
provided to the public for play,” simply describes the type of
machines from which these revenues are generated — i.e., COAMs
— it does not indicate that the gross revenues can only be generated
by playing the COAMs. OCGA § 48-8-3 (43) Certainly, when a
17 customer inserts money into a COAM for play, it generates revenue
for the location owner. See OCGA § 50-27-70 (b) (8). However, when
a person to whom a COAM has been leased makes a lease payment
on the subject COAM, it also generates revenue for the person
leasing the COAM (i.e., the dealer or COAM owner). See OCGA § 50-
27-70 (b) (13).
In this case, Tiny Towne leases the subject COAMs to
Funvestment, and in this context, the COAMs generate income (or
revenue) for Tiny Towne when Funvestment makes the
corresponding lease payments. And, as noted above, in accordance
with OCGA § 48-8-30 (d) (1), Funvestment would typically be
required to pay sales and use taxes to Tiny Towne for its lease of
these COAMs, and Tiny Towne would then be required to remit
those taxes to the DOR, unless the exemption at issue — or some
other exemption — applied.
Given the common and legal meanings of “revenue” and “gross
revenue” delineated above, we conclude that the plain language of
18 the phrase, “[g]ross revenues generated from all bona fide coin
operated amusement machines” set forth in OCGA § 48-8-3 (43) is
unambiguous and applies to any revenues a COAM generates or
brings into existence, which, in this case, are revenues generated by
the lease of the COAMs and revenues generated by the playing of
the COAMs. This is the most “natural and reasonable way” to read
this statute. Bell, 313 Ga. at 32 (2) (citation and punctuation
omitted). Thus, the lease payments Funvestment makes to Tiny
Towne for its lease of the COAMs — which also constitute income to
Tiny Towne — are exempt from sales and use taxes under OCGA §
48-8-3 (43), and Funvestment is not obligated to pay nor is Tiny
Towne obligated to remit any sales and use taxes to the DOR on
these lease revenues.
(b) The standard to be applied in analyzing tax statutes
We also asked the parties to address on certiorari how the
“interpretive presumption” regarding tax statutes delineated in
Owens Corning, 283 Ga. at 489, and the “apparently competing
19 interpretive presumption” of tax statutes outlined in Telecom*USA,
260 Ga. at 363 (1), might bear on the meaning of OCGA § 48-8-3 (43)
and any other statutes at issue in this case. We ultimately conclude
that Owens Corning and Telecom*USA are not incompatible as far
as the standard to be applied in analyzing tax statutes in general —
these cases merely distinguish between the standards to be applied
when there is ambiguity in either a tax statute imposing a tax or a
tax statute creating an exemption to a tax — and we need not apply
either of these standards here because we have concluded that
OCGA § 48-8-3 (43) is not ambiguous.
In Owens Corning, 283 Ga. at 489, this Court announced the
“well-settled” standard for analyzing tax statutes.
Taxation is the rule, and exemption from taxation is the exception. And exemptions are made, not to favor the individual owners of property, but in the advancement of the interests of the whole people. Exemption, being the exception to the general rule, is not favored; but every exemption, to be valid, must be expressed in clear and unambiguous terms, and, when found to exist, the enactment by which it is given will not be enlarged by construction, but, on the contrary, will be strictly construed.
20 Id. (citation and punctuation omitted). When a statute creating a tax
exemption is ambiguous, “the statute must be interpreted in favor
of the tax, not the exemption.” Id. at 490. See also Amoena Corp. v.
Strickland, 248 Ga. 496, 500 (3) (283 SE2d 894) (1981) (holding that
“tax exemptions are to be strictly construed against the taxpayer
and doubts resolved in favor of taxability”). On the other hand,
“when a taxing statute [imposing a tax] has doubtful meaning, it
must be construed liberally in favor of the taxpayer and against the
State.” Telecom*USA, 260 Ga. at 364 (1). See also Cherokee Brick &
Tile Co. v. Redwine, 209 Ga. 691, 692 (1) (75 SE2d 550) (1953)
(explaining that, when a tax statute imposing a tax “is of doubtful
meaning, it must be construed liberally in favor of the taxpayer and
against the taxing authority”; whereas, “any ambiguity in an alleged
exemption from taxation must be construed favorably to the State
and against the taxpayer”).
Because the statute at issue in this case — OCGA § 48-8-3 (43)
— creates an “exemption from taxation,” if there was any ambiguity
21 in the statute, we would resolve it in favor of the State — i.e., in
favor of taxability. Cherokee Brick & Tile Co., 209 Ga. at 692 (1). See
also Owens Corning, 283 Ga. at 490. However, as we concluded
above, the plain language of OCGA § 48-8-3 (43) is “clear and
unambiguous,” and thus, we need not construe it in favor of the
State but in accordance with its explicit terms. Owens Corning, 283
Ga. at 489.
4. Conclusion
Accordingly, because the plain language of OCGA § 48-8-3 (43)
applies to revenues generated by COAMs, which includes revenues
generated from the lease of COAMs and revenues generated from
the participation plays of COAMs, we conclude that the Court of
Appeals erred in concluding that the exemption did not apply to the
lease revenues generated in this case, and we reverse the judgment
of the Court of Appeals.
Judgment reversed. All the Justices concur, except Colvin and Pinson, JJ., disqualified.
22 Decided September 19, 2023.
Certiorari to the Court of Appeals of Georgia — 364 Ga. App.
447.
Wimberly Lawson Steckel Schneider & Stine, Les A. Schneider,
Paul Oliver, Thomas L. Walker, for appellant.
Christopher M. Carr, Attorney General, Logan B. Winkles, Julie
A. Jacobs, Deputy Attorneys General, Ronald J. Stay, Senior
Assistant Attorney General, Melody Chapman, Paul R. Draper,
Assistant Attorneys General, Stephan J. Petrany, Solicitor-General,
Ross W. Bergethon, Deputy Solicitor-General, for appellee.
Balch & Bingham, Patrick N. Silloway, J. Mitchell Fucetola;
Robbins Alloy Belinfante Littlefield, Joshua B. Belinfante; Bradley
Arant Boult Cummings, Christopher S. Anulewicz, amici curiae.