Licence Fees for Vending, Automated Tellers, VLT, etc., Machines (D. Thiele)

Recommendation:
That the October 27, 2003, Planning and Development Department report be received for information.

Report Summary

This report is in response to an inquiry on licence fees for vending, automated tellers, Video Lottery Terminals (VLTs), etc., machines.

Previous Council/Committee Action

At September 8, 2003, City Council meeting, Councillor D. Thiele made the following inquiry:

“This inquiry is about the proliferation of various types of vending, automated teller, VLTs, etc., machines that are being used throughout Edmonton, and the City of Edmonton’s ability to charge licence, or other fees, for their use within the City.

My questions are:

  1. Can a municipality charge a business licence fee, or other fees or taxes, for an automated teller machine that is:

a)located in a bank?

b)located in a place other than a bank, such as a convenience store?

c)located in a completely independent location, such as a separate drive-through?

  1. Do we currently charge any fees, taxes, etc., for operation of various types of these machines that are used in the City of Edmonton, such as bank machines, VLTs, slot machines, or other types of vending machines?
  1. Could you please provide an estimate of the number of these types of machines that are currently used in the City of Edmonton?
  2. Can we charge for other machines as above that are owned by the Province, such as VLTs, slot, and vending, or similar, machines?
  3. Do owners of these machines require a business licence and is the cost of it in any way related to the number of machines in place?
  4. What would be a reasonable per-year rate that could be levied and what is the potential revenue?
  5. What is done in other municipalities, Provinces and the United States?

I would like the report to return to the Community Services Committee.”

Report

  1. Can a municipality charge a business licence fee, or other fees or taxes, for an automated teller machine that is:

a)located in a bank?

b)located in a place other than a bank, such as a convenience store?

c)located in a completely independent location, such as a separate drive-through?

  • Banks are exempt from municipal licensing in accordance with Federal legislation. This includes Automated Teller Machines (ATMs) that perform more than a “cash withdrawal function” and are under control of a bank.
  • It may be possible to license cash dispensing machines with an annual fee, where these machines are located on private property not owned by a bank. Examples would include those cash dispensing machines in convenience stores, shopping malls and other private property that the public may access.
  • Property tax is levied against the landowner. In the case of a shopping mall, the owner of the mall pays the property tax, and likely includes this value in its lease or rental charges to all businesses located within the mall. A drive-through banking service located on a shopping mall’s property would have property tax assessed in the same manner as if it was located within the mall, as long as the shopping mall owner owns the property on which the drive-through is located.
  • Business tax on banks is assessed annually. Likewise, any ATM, or cash-dispensing machine, where located in a shopping mall in a similar fashion to other stand-alone kiosks, is assessed business tax. An ATM located within a convenience store is not assessed business tax. This piece of equipment is considered as one amenity of the convenience store operation. The convenience store itself is assessed a business tax.
  1. Do we currently charge any fees, taxes, etc., for operation of various types of these machines that are used in the City of Edmonton, such as bank machines, VLTs, slot machines, or other types of vending machines?
  • Business tax assessment will be made for machines that operate within a shopping mall when they represent a kiosk style of operation. Where these machines are included as one amenity, or piece of equipment, in a convenience store or a neighbourhood pub, there is no specified business tax fee assigned to the equipment.
  • Under the Business Licence Bylaw, fees are charged where a business operation includes slot machines, games of skill or VLTs. The business licence fee is based on the activity being part of the overall operation. We do not, in the new Business Licence Bylaw, charge a fee based on the number of machines at each location. Our former Business Licence Bylaw did take this approach, whereby a fee was charged for every vending machine present at any business location. Through our best-practice research across Canada, our bylaw development team recommended that it was sufficient to levy a business licence fee based on the “activity,” not based on “volume” or number of machines located in any business location. This approach has been well received by the business community and is much more effective to regulate from an enforcement perspective.
  1. Could you please provide an estimate of the number of these types of machines that are currently used in the City of Edmonton?
  • We have no information source that would provide a composite listing of all types of vending machines in Edmonton. We do know that in 2001 there were approximately 21,000 vending machines licensed by the City. This total includes cigarette machines, pop and candy machines, washing and drying machines, billiard tables, VLTs, etc. The Alberta Gaming and Liquor Commission has informed us that there are presently 1,212 VLT machines in the city.
  1. Can we charge for other machines as above that are owned by the Province, such as VLTs, slot, and vending, or similar, machines?
  • It may be possible to establish licensing fees for VLTs. We would need to research provincial legislation governing these gaming devices and determine whether or not there is an opportunity for municipal licensing in addition to provincial licensing.
  • The philosophical basis of the current Business Licence Bylaw reflects a business activity trigger for licence categories and fees. It does not contemplate licence fees based on the number of pieces of equipment in a business, such as the number of VLT machines, billiard tables, bar seats, screens in a movie theatre, nozzles at a gas bar, etc.
  • Administration continues to support having an activity trigger for licence fees, as opposed to a volumetric trigger for licence fees. First of all, this is an easy threshold to establish. A company is either in business, or it is not. Second, enforcement challenges significantly increase when we are charged with the responsibility of determining whether a company has 22 slot and vending machines, or 27.
  1. Do owners of these machines require a business licence and is the cost of it in any way related to the number of machines in place?
  • Yes, the owner of vending machines does require a business licence, with the exception of banks, which own ATMs and any other form of cash-dispensing machine. Again, the latter are exempt from municipal licensing regulation. The licence fee is not based on the number of machines that a company owns.
  1. What would be a reasonable per-year rate that could be levied and what is the potential revenue?
  • Our former licence bylaw had a wide variety of fees for various types of vending machines. By example, the following annual licence fees are shown:

a)Amusement Establishments;

  1. up to 11 machines = $110
  2. 21 to 25 machines = $530
  3. over 36 machines = $1,600

b)Pop machines = $10

c)Candy machines = $5

d)Cigarette machines = $30

  • By migrating from a business licence scheme that did vary the licence fees based on the number of machines at each location, to a scheme which supports business licence fees based on a business activity, Administration has achieved a “revenue neutral” solution for the City of Edmonton. This was one of City Council’s objectives in creating a new Business Licence Bylaw in 2002. Although it is possible to return to a system of basing licence fees on the volumetrics of a variety of vending machines, the business community is likely to view this approach as a cash grab.
  • Because the new Business Licence Bylaw reduced the number of categories and rationalized fees, generally the revenues that might have been captured under the old Business Licence Bylaw approach of charging by number of machines is already captured in the new fees of the new Business Licence Bylaw. Therefore, Administration would suggest that significant new net revenues are not necessarily available in returning to the old ways.
  • In addition it is noted that the administrative costs of tracking and enforcing any system that regulates by number of items, be they vending machines, bank machines or VLTs is extremely expensive.
  1. What is done in other municipalities, Provinces and the United States?
  • Based on research conducted a short time ago, we continue to find varied approaches across Canada. The Municipal Government Act in various Provinces and Territories does vary somewhat in the rights assigned to municipalities. At this time, the City of Victoria, British Columbia, is the only municipality we have found that does require a separate business licence for each ATM machine located off the property of a Chartered Bank. Their licence fee is $700 per machine per year.

In summary, although there is potential to assess municipal licence fees for various types of vending machines, the administrations current stance is that initiating this type of municipal licensing is not congruent with the philosophical basis on which the Business Licence Bylaw was created. The existing Business Licence Bylaw will trigger the requirement for a business licence based on an activity, not on a basis of volumetrics or size of operation. Both property tax and business tax does take these latter factors into consideration prior to determining an appropriate assessment.

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