Ryan Announces Texas Court of Appeals Extends Resale Exemption to 'Plush' Items

DALLAS, Feb. 24, 2011 /PRNewswire/ -- Ryan, the leading tax services firm in North America, with the largest transaction tax practice in the United States and Canada, today announces that on January 26, 2011, the Texas Court of Appeals for the Third District ("Court of Appeals") filed its decision in the case of Roark Amusement & Vending, L.P. v. Combs. At issue in the case was whether Roark Amusement & Vending, L.P. ("Roark") was eligible to claim a resale exemption on purchases of plush toys used in Roark's coin-operated amusement services.

In the operation of its business, Roark used the plush toys to stock its coin-operated amusement crane machines. The machines were of the type commonly found in grocery stores, restaurants, and shopping malls, consisting of a glass tank filled with plush toys with a suspended mechanical claw. By inserting coins into these machines, customers may activate and control the claw to pick up and move a plush toy to a dispensing area from which successful customers receive toys.

Texas law provides an exemption from sales and use tax if the purchased goods or taxable services will be resold. "Resold" includes the transfer of personal property or a taxable service as an integral part of a taxable service sold.

Unlike amusement services generally, coin-operated amusement services are exempt from Texas sales and use tax. The Court of Appeals agreed with Roark and held that coin-operated amusement services were "taxable" within the meaning of Texas' sale-for-resale exemption. Borrowing a phrase coined by Roark in the proceedings, these amusement services constituted "taxable-exempt" services, a subset of "taxable" services.

In making this determination, the Court of Appeals looked to whether coin-operated amusement services fall within any category of taxable services enumerated in the Texas Tax Code. Finding that these services fall within the definition of "amusement services" upon which tax is generally imposed, the Court of Appeals concluded that these services are taxable services for purposes of the sale-for-resale exemption. The fact that the Legislature carved out a separate exemption for coin-operated amusement services did not prevent an amusement service provider from claiming a resale exemption when purchasing goods for resale as a part of its exempt amusement service. Because the plush toys at issue were purchased to be transferred "as an integral part of" Roark's amusement services, the Court of Appeals held that Roark could claim a resale exemption on the purchase of plush toys.

About Ryan

Ryan is the leading global tax services firm, with the largest indirect tax practice in North America and the seventh largest corporate tax practice in the United States.  Headquartered in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning.  In 2010, Ryan received the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service.  Empowered by the award-winning myRyan work environment which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 900 professionals and associates serves many of the world's most prominent Fortune 1000 companies.  More information about Ryan can be found at www.ryan.com.

SOURCE Ryan

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