Funvestment Grp. v. Crittenden, A22A0193

CourtUnited States Court of Appeals (Georgia)
Writing for the CourtBARNES, PRESIDING JUDGE
Decision Date23 June 2022
Docket NumberA22A0193



No. A22A0193

Court of Appeals of Georgia, First Division

June 23, 2022



This appeal seeks to overturn a superior court's judgment in favor of Robyn A. Crittenden, in her official capacity as the Commissioner of the Georgia Department of Revenue (the "Department"),[1] and against Funvestment Group, LLC (the "Taxpayer"). The contested ruling rejected the Taxpayer's claim that the amount it paid to lease certain of its business equipment is exempt from sales and use taxation. For the reasons explained below, the judgment is affirmed in part and vacated in part.

These facts are undisputed. The Taxpayer operates a business where children can drive miniature vehicles along an indoor track and learn about driving safety. At


its business, the Taxpayer also offers an arcade room, party rooms for group events, a restaurant, and a lab equipped with touchscreen computers and simulators. The Taxpayer leases certain of its business equipment - relevant here, its "coin operated amusement machines" a/k/a "COAMs" - from another entity, (non-party) Tiny Towne International, LLC. In leasing its COAMs during the relevant period, the Taxpayer was contractually obligated to pay Tiny Towne "10 percent [ ] of the total gross revenue after deductions for state master license, state sticker fees and refunds[] and 10 [percent] of other gross income generated by [the Taxpayer's] business."

The primary question in this appeal is whether the amount paid to lease the COAMs is exempt from taxation by 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 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

Regarding the procedural background, the Taxpayer filed a petition with the Georgia Tax Tribunal[2] seeking reprieve from the Department's assessment of sales and use tax on payments made for leasing the COAMS.[3] On cross-motions for summary judgment, each party contended that OCGA § 48-8-3 (43) was plain and unambiguous such that application thereof rendered the result it urged. The Tax Tribunal entered a decision in the Taxpayer's favor, concluding that "OCGA § 48-8-3 (43) exempts [the Taxpayer] . . . from paying sales and use tax on its lease payments to Tiny Towne[.]"


Pursuant to OCGA § 50-13A-17,[4] the Department sought judicial review by the Fulton County Superior Court. The court concluded that the Taxpayer could not utilize that statutory exemption, determining that the exemption applies "to revenue generated from plays of COAMs, but does not apply to lease transactions of COAMs." Among other things, the court reasoned:

[T]he plain language of the exemption means the COAM itself must "generate" the revenue by "vend[ing] or dispens[ing]" music or public play by inserting money. Because the leases do not constitute remuneration for "vend[ing] or dispens[ing]"music or public play, the exemption clearly applies only to the money inserted into the COAMs for play, not leases of the COAMs themselves.

(Emphasis in original.) The court went on to ascertain that the Taxpayer's "expansive interpretation of OCGA § 48-8-3 (43) would lead to absurd results." As the court saw it, the Taxpayer's position - which it summarized as "the lease payment it makes on COAMS[,] where some percentage of the payment includes participation play revenue[,] should be exempt from taxation simply because such payments are partially made with money generated from participation play" - would lead to the


untenable circumstance that any subsequent transaction using revenue from COAM participation plays would also be exempt. For example, the court elaborated: "Under [the Taxpayer's] interpretation, any purchase or lease of building, facilities, utilities, supplies, fixtures, furniture, etc., would be exempt as long as the purchases or leases were made with revenues from COAM participation plays." Additionally, the court cited Ga. Dept. of Revenue v. Owens Corning, 283 Ga. 489 (660 S.E.2d 719) (2008), for the principle that "the interpretation of a statute by an administrative agency which has the duty of enforcing or administering it is to be given great weight and deference." Id. at 490. Moreover, the superior court found that the legislative history surrounding the taxation of COAMs showed legislative intent to "exempt gross revenue generated from customers playing the machines, not leases." Finally, the superior court went on to hold that "[w]ithout proper evidence of the lease payments, the Department may assess sales tax for the leases based on the sales price of the COAMs." In light thereof, the superior court reversed the Tax Tribunal's decision, and remanded the case for judgment to be entered in favor of the Department. Dissatisfied with the superior court's order, the Taxpayer procured this discretionary appeal.


1. The Taxpayer contests the superior court's determination that OCGA § 48-8-3 (43) does not apply to their lease payments. "The interpretation of a statute is a question of law, which is reviewed de novo on appeal." Junior v. Graham, 313 Ga. 420, 423 (2) (870 S.E.2d 378) (2022); see Amazing Amusements Group v. Wilson, 353 Ga.App. 256, 256 (835 S.E.2d 781) (2019) (applying de novo standard of review, where case turned on statutory interpretation and resolution of questions of law).

(a) The Taxpayer contends that the superior court erred "by giving the words 'gross revenue' an unnatural meaning which limit those words to revenue generated from playing COAMs when the General Assembly did not include any words of limitation."

In support of this contention, the Taxpayer recites dictionary definitions of "gross revenues";[5] discerns therefrom that the ordinary and everyday meaning of "'gross revenues' does not limit [the exemption] to any particular source of revenue"; and asserts that "[n]owhere in the plain language does OCGA § 48-8-3 (43) limit the


. . . exemption to the transaction of playing COAMS." The Taxpayer thus posits, "The only natural reading of the exemption includes leased income in the gross revenues."

Even accepting the Taxpayer's premise concerning the applicable definition(s) of "gross revenues,"[6] we find no merit in the Taxpayer's ultimate position, because it disregards 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 to the public for play." OCGA § 48-8-3 (43).

When we consider the meaning of a statute, we must presume that the General Assembly meant what it said and said what it meant. To that end, we must afford the statutory text its plain and ordinary meaning, we must view the statutory text in the context in which it appears, and we must read the statutory text in its most natural and reasonable way, as an ordinary speaker of the English language would.

(Citations and punctuation omitted.) Deal v. Coleman, 294 Ga. 170, 172-173 (1) (a) (751 S.E.2d 337) (2013). Additionally, we are required "to avoid a construction that makes some language mere surplusage." Slakman v. Continental Cas. Co., 277 Ga. 189, 191 (587 S.E.2d 24) (2003).

Hence, we reject the Taxpayer's argument that:

Nowhere in the plain language does OCGA § 48-8-3 (43) limit the sales and use tax exemption to the transaction of playing COAMS. . . . [T]he General Assembly chose not to limit the exemption. As the statute reads, the exemption applies to all gross revenue including gross revenue from the COAMS used to make lease payments.[7]

(Emphasis supplied.) Not only is the Taxpayer's position contrary to the principles noted above, the position fails to accord with these well-settled standards for reviewing taxation statutes:

Taxation is the rule, and exemption from taxation is the exception. . . . 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.

(Citation and punctuation omitted.) Owens Corning, 283 Ga. at 489 (reciting principles for determining applicability of exemption set forth in § 48-8-3). The statutory provision at issue here, OCGA § 48-8-3 (43), contains no clear and unambiguous expression of an exemption applicable also to the Taxpayer's lease payments to Tiny Towne.

For the foregoing reasons, this challenge to the superior court's judgment lacks merit. See generally Spectera, Inc. v. Wilson, 294 Ga. 23, 26 (1) (a) (749 S.E.2d 704) (2013) ("Where the language of a statute is plain and susceptible to only one natural and reasonable construction, courts must construe the statute accordingly. In fact, where the language of a statute is plain and unambiguous, judicial construction is not only unnecessary but forbidden.") (citation and punctuation omitted).

(b) Seeking to avoid such interpretation of the plain language of OCGA § 48-8-3 (43), the Taxpayer advances the following arguments.

(i) The Taxpayer contends that the superior court committed reversible error "when it found that the Tax Tribunal's decision was erroneous as a matter of law because it failed to accord deference to the Department in the interpretation of its


statutes." In an attempt to support this contention, however, the Taxpayer misplaces reliance on language...

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