Court Opinion

ID: 9840548
Source: CourtListenerOpinion
Date Created: 2023-09-19 13:03:59.098866+00
Date Added: 2024-06-11T10:35:41.683773
License: Public Domain

NOTICE: This opinion is subject to modification resulting from motions for reconsideration under Supreme Court
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 official text of the opinion.

In the Supreme Court of Georgia

                                                          Decided: September 19, 2023

      S22G1247. FUNVESTMENT GROUP, LLC v. ROBYN A.
      CRITTENDEN, IN HER OFFICIAL CAPACITY AS
    COMMISSIONER OF THE GEORGIA DEPARTMENT OF
                     REVENUE.

      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

                                —————————————————————
      1 OCGA § 48-8-3 (43) provides that

      [t]he 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
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”

and that the exemption only applies to money inserted into COAMs

for play. See Funvestment Group, LLC 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.

                                    2
     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]

percent of the total gross revenue after deductions for state master

license, state sticker fees, and refunds, and [ten] percent of the 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-

4-30 (d) (1). However, because OCGA § 48-8-3 (43) provides that

“gross revenues generated from [COAMs]” 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

                       —————————————————————
     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
audit, the DOR issued a proposed assessment to Funvestment to

collect the value of these unpaid taxes.

     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 Georgia Dept. of Revenue v. Owens Corning, 283 Ga. 489

(660 SE2d 719) (2008), the Tax Tribunal concluded that OCGA § 48-

                                     4
8-3 (43) was clear, and pursuant to the clear language of that

statute, “the General Assembly unambiguously exempted all gross

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

                                    5
that “[t]axation is the rule, and exemption from taxation is the

exception.” Funvestment, 364 Ga. App. at 451 (1) (a) (citing Owens

Corning, 283 Ga. at 489). After determining that the “words of the

statutory provision are plain,” id. at 454 (1) (b) (ii), the Court of

Appeals held that

     the 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

                                    6
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

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., Georgia

Dept. of Revenue v. Owens Corning, 283 Ga. 489, 489 (660 SE2d 719)

(2008) with Telecom*USA, Inc. v. Collins, 260 Ga. 362, 363 (1) (393

SE2d 235) (1990).

     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[.]

                                    7
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

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-

57 (3) (a) (784 SE2d 373) (2016) (“[T]he statutory scheme [regulating

COAMs], which is now administered by the Georgia Lottery

                        —————————————————————
      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 award 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
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 (“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 as “the owner or operator of a business

where one or more [COAMs] are available for commercial use and

play by the public”); OCGA §§ 50-27-20 (b) (10) and (13) and 50-27-

71 (a) (requiring master license fees for COAM owners, who are

defined 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, see OCGA §§ 50-27-70 (b) (14), and receive a

                                     9
“sticker” or “decal” for each COAM, showing “proof of payment of the

permit fee.” OCGA § 50-27-78.       On appeal, Funvestment asserts

that this COAM-licensing fee structure was established by the

General 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. 136, 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.

                     —————————————————————
     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
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

described in this article.”       OCGA § 48-8-30 (a) (1).         “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.

                        —————————————————————
      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
     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 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

                                      12
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)

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 that:

     [t]he 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

                                      13
     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.

Hargrove, 313 Ga. 30, 32 (2) (867 SE2d 101) (2021) (citations 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.

      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.” (Punctuation omitted). 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

                                    14
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 450-451 (1) (a).           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 452 (citing

Owens Corning, 283 Ga. at 489). On this basis, the Court of Appeals

affirmed the superior court, noting that “the 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.

We disagree and conclude that, by its plain terms, OCGA § 48-8-3

(43) covers revenues generated from the lease of COAMs, as well.

                                    15
     “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). Our analysis largely turns on the meaning of the phrase,

“[g]ross revenues generated from all [COAMs].” 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

                                      16
from all sources before deductions, exemptions, or other tax

reductions.” Revenue and Gross Income, BLACK’S LAW DICTIONARY

(6th ed. 1991). Thus, by 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 [COAMs],”

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

                                   17
generated—i.e., COAMs—it does not indicate that the gross

revenues can only be generated by playing the COAMs.           Id.

Certainly, when a 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.

                                  18
     Given the common and legal meanings of “revenue” and “gross

revenue” delineated above, we conclude that the plain language of

the phrase, “[g]ross revenues generated from all [COAMs]” set forth

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).

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,

Inc., 260 Ga. at 363 (1), might bear on the meaning of OCGA § 48-4-

3 (43) and any other statutes at issue in this case. We ultimately

conclude that Owens Corning and Telecom*USA, Inc. 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, 499 (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.        See also

Cherokee Brick & Tile Co. v. Redwine, 209 Ga. 691, 693 (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 a

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

                                   21
ambiguity 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 693

(1). See also Owens Corning, 283 Ga. at 490. However, as we

concluded above, the plain language of OCGA § 48-8-6 (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