California, Vending Machines, and Sales Tax
- Jan 22, 2013 | Gail Cole
Update, 11.11.13: The California State Board of Equalization updated Publication 118, Vending Machine Food Sales on October 1, 2013, to reflect the most up to date sales tax factors.
How your snack food is taxed may not be the first thing to come to mind when you purchase food at a vending machine, but rest assured, someone is thinking about it. To help inform interested parties, the California State Board of Equalization has recently released a publication regarding the application of sales tax to vending machine food sales: Publication 118, Vending Machine Food Sales.
The Skinny on Seller's Permits
A vending machine operator is the person who stocks the machines and collects the money from sales. Vending machine operators "generally need seller's permits." The good news? One permit covers all vending machines in the state of California, whether an operator has two or two hundred. Please note that different localities may have different local tax rates: see California City, County, and District Tax Rates.
- If all vending food items are priced at 15 cents or less, a seller's permit is not required. It's hard to imagine what food would sell for that price these days, but there it is.
- If the operator is a nonprofit organization, such as a parent-teacher association or a library support group (examples provided in the information publication), a seller's permit is not required. See Nonprofit Organizations for additional information.
The Skinny on Taxing Vending Machine Food Sales
- While cold food items sold in stores are not subject to tax, when such items are sold through vending machines, they are "partially taxable." According to the BOE, "[t]ax applies to 33 percent of your gross receipts from vending machine sales of cold food products (including noncarbonated water) and hot drinks."
- "Vending machine sales of all carbonated beverages and hot food products (other than hot beverages) are fully taxable, just as they would be in a store or at a restaurant."
- "[P]roducts other than food … are generally taxable." Remember the cigarette vending machine?
The following items, when sold from a vending machine, are exempt from sales tax:
- "[B]ulk sales of candy and other food items in a coin-operated vending machine for 25 cents or less;" and
- "[S]ales of purified drinking water dispensed into a customer's container when the water enters the vending machine through local supply lines."
Reporting Tax on Vending Machine Sales
The California BOE presumes that "the sales price of items you sell in a vending machine includes an amount for sales tax reimbursement." The tax must be deducted from the gross sales on completed sales and use tax returns.
Vending machine operators are advised to "keep separate records of your partially taxable and fully taxable sales."
The BOE provides a Sales Tax Factor table to help vending machine operators calculate the tax owed. Figures for 100% taxable sales and 33% taxable sales are provided.
Additional information about vending machines and sales and use tax regulations is available in the following BOE publications:
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