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State 's new fees not fair, arcade owners complain

Posted: Sunday, July 04, 2010

A new state law adding fees for operators of arcade games has two Columbia County amusement park owners decrying the government for picking on the little guy.

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Senate Bill 454 went into effect Thursday. The law separates arcade games into two classes, and introduces a "location" fee for business owners featuring the games.

"Class A games are those played for pure amusement, or for free replays, or continued time," explained Les Schneider, an Atlanta-based attorney and lobbyist for the Georgia Amusement and Music Operators Association. "A Class B game is a game where you could win merchandise for the successful playing of the game."

Galaga or Donkey Kong would classify as a Class A game. Skee Ball, which dispenses vouchers redeemable for merchandise, is a Class B Game.

The distinction is important: the fee for Class A games is $25 per machine, while Class B is $125 per machine.

Because merchandise is involved and more legwork is required from the state Department of Revenue, the fees for Class B games are higher, said Tim Mitchell, manager of the Tax Law and Policy Division of the DOR.

Mitchell said he had "no idea" how much added revenue the new fees will bring to the state.

"That's because we have no idea how many locations are going to be applying," he said. "It could be as little as 1,000 or as many as 40,000."

Once, the state charged licensing fees only to the owners of the machines. Now, owners of the businesses where the machines are operated also are charged. If an individual owns the machines and the business, as do Martinez Putt-Putt's Mark Ross and Adventure Crossing's Ed Smith, he or she is doubly charged.

"I don't see how that's fair," said Ross. "I don't understand why it has to be so drastic an increase."

Ross owns about 40 arcade games and once paid licensing fees of about $1,000. Under the new law, he estimates his costs will go up to as much as $7,000.

"This isn't going to be a big enough hit to run us out of business, but it will run some people out of business," he said. "What good will these fees do if you run people out of business? Not only will the state not collect the added fees, it won't get any fees or taxes."

Schneider and Mitchell said SB 454 wasn't meant to overburden small businesses.

"This is just a way for us to get a better handle on who is operating what, and where," Mitchell said.

Smith and Ross disagree.

"It's as simple as government once again finding a way to raise taxes on a specific group of constituents that are not high in numbers," said Smith, who would not disclose how much more in fees he'll have to pay. "They can get more tax income without any negative political consequences."

Ross said he doubts that he'll raise prices to compensate for the loss he's taking because of the added fees. He believes the market would not tolerate the increase.

Smith is less sure, saying he'll have to discuss price increases with his business partners.

"At some point, you either continue to lose profit margin or you raise prices," he said. "We're going to need to have that unfortunate discussion.''

Though the law already is in effect, Mitchell said his office won't immediately demand payment. By the end of the month, affected business owners should receive an information sheet from DOR explaining the new law and the owners' responsibilities to comply with it. Payments likely will be required by mid-August.



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