***This post has been updated 01/2020 to reflect the most recent & accurate information.***
Avalara, an authority on sales tax for Sage 100 and Acumatica, hosts a weekly showcase of what they consider to be "wacky tax" laws. This week they ask the tough tax questions involving our old junk food-harboring friend, the vending machine.
According to Wikipedia, the first vending machine was constructed in ancient Egypt. In this first machine, a coin was placed in a slot on the top of the machine and as a result a set amount of holy water dispensed. This novel invention lead to coin-operated pencil vendors centuries later in China and then Tobacco boxes in British taverns centuries after that.
Finally in 1888, vending machines were considered a “viable market” in the U.S. Fast forward to 2020 and the list of things that can be purchased from a vending machine is shockingly impressive.
From candy and chips in offices to freshly baked pecan pie in Texas and beef jerky in Washington state. In the United States, vending machines typically disperse food and beverages, hot or cold which begs the following:
Question: Can vending machine sales be subject to tax?
Answer: Definitely!
In actuality, sales and use tax applies to vending machine transactions varying state by state and the line is so fine, its a little more complicated than it seems.
Because Klear Systems HQ is in California, we'll start there:
In the Golden State, cold food items and individual hot drinks (aka coffee) are generally exempt from California sales tax when sold from a store location. Candy, chips, cookies, fresh fruits and vegetables, fruit and vegetable juices, and granola bars are also exempt when bought in-store.
With that being said, everything changes when a vending machine gets involved. ALL OF THE ABOVE are subject to sales tax if purchased from an automated box. In short, they are considered “partially taxable. Tax applies to 33 percent of your gross receipts from vending machine sales of cold food products and hot drinks.”
Exceptions:
Tax does not apply to the following:
- Bulk sales of candy and other food items sold from a coin-operated vending machine for 25 cents or less.
- Sales of purified drinking water dispensed into a customer’s container when the water enters the vending machine through local supply lines.
The full rate of sales tax applies to the following:
- All carbonated beverages
- Hot food products (other then hot beverages)
- Other food products, such as the little aliens featured in Toy Story, are generally taxable
(California BOE Publication 118).
And now you know!
Thanks for clearing that up, Avalara!
For more information on Sales Tax Automation for Sage 100 or Acumatica, Please contact us today!
