Lawmakers press auditors on coin-operated amusement machine revenue model and possible effects on lottery HOPE funding

During the joint briefing on audits of tax incentives, presenters singled out the coin-operated amusement machine (COAM) sales-tax exemption for a separate discussion of revenue models and downstream effects.

Matt Taylor (Department of Audits) and Ben McCain (Georgia Southern University) described two alternative revenue approaches: a states-levied sales tax on gross game receipts (used in some states) and Georgia's existing model, which relies on licensing plus a 13% share of net revenue (net defined as gross receipts minus non-cash payouts). McCain said the researchers "kept it very narrow to the southeast" in comparative work and found Georgia's approach "stood out as being as having a net benefit over what some of the other states were doing in the in the area."

The key comparison the researchers reported was that a sales-tax model applied to gross receipts would have produced about $203,000,000 in fiscal 2024; under the current licensing-and-net-share model, if the state had received 13% of net revenue for the entire year the revenue collected would have been about $10,000,000 less, the presenters said. The researchers cautioned a sales-tax approach could have higher enforcement costs and lower compliance in practice because Georgia's lottery corporation already connects to class‑B machines under the present model.

Committee members pressed for downstream consequences. Chairman (unnamed in the transcript) walked through arithmetic used by colleagues, explaining that 13% of net translates to roughly 4% of gross receipts under typical payout structures and that a lottery ticket yields about 28 cents per dollar for the state while a COAM dollar at 13% of net would yield roughly four cents. He warned that if COAM sales cannibalize lottery sales, the HOPE Scholarship Fund could lose revenue: "If we cannibalize the lottery by selling more of these, the Hope Scholarship Fund is not gonna do well. It's gonna lose money," he said.

Researchers and other members also raised enforcement and distribution questions: Jeremy Kouser asked whether the team examined how other states split proceeds between master licensees, locations and the state; McCain cited Illinois as an example that divides revenue roughly into thirds among master licensee, location and state, noting jurisdictions vary.

Nicholas Warner of the Fiscal Research Center answered a separate question about the jet-fuel analysis and time scale, saying, "the most important thing to think about in terms of your question is the time scale. We looked at a period when the when jet fuel was taxed, and we just didn't see much shifting away from fueling in in Georgia." That exchange reflected committee concerns about whether changes in tax treatment would change operator or consumer behavior over short- versus long-term horizons.

No policy changes were enacted at the briefing. Presenters said their reports include revenue comparisons, enforcement considerations and that one-page summaries and full reports will be published for committee review.