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Indiana could exempt juice, vending machine food

  • Mar 9, 2017 | Gail Cole

 Should food sold through vending machines be exempt from Indiana sales tax?

Although food and food ingredients for human consumption are generally exempt from Indiana sales tax, there are many exceptions to that broad exemption. All food sold through vending machines is taxable, as are candies, soft drinks, and many juices. However, two bills currently under consideration in the Indiana Legislature are seeking to change the taxability of juice and vending machine food. If both are enacted, these sales will be exempt.

Taxable juice

Currently, certain juices are taxable because they’re defined as soft drinks. Taxable juices include nonfrozen fruit and vegetable juices containing 50 percent or less juice, and juices containing greater than 50 percent juice that also contain natural or artificial sweeteners and are “made from concentrate through a water extraction method.”

House Bill 1459 removes from the definition of “soft drinks” beverages containing greater than 50 percent fruit juice or vegetable juice by volume, “regardless of whether or not the beverage:

  • Contains carbonated water; or
  • Is mixed with another vegetable or fruit juice in a manner, which before July 1, 2017, would have resulted in the beverage being included as a soft drink.”

According to the fiscal note, HB 1459 “could potentially reduce sales tax revenue by an indeterminable amount. The impact will depend on sales of certain beverages containing greater than 50% vegetable or fruit juice that are currently taxable.”

The bill goes a bit against a growing global trend to tax a variety of sweetened beverages, and it hasn’t received much attention since its introduction in mid-January. It was authored by Republican Rep. Robert Morris, who also authored House Bill 1460, which seeks a sales tax exemption for firearms and ammunition, and House Bill 1451, which seeks a sales tax exemption for casual sales of used passenger motor vehicles.

Food sold through vending machines

Food for human consumption that is sold through vending machines is also currently subject to Indiana sales tax. House Bill 1013 would eliminate the state gross retail tax on food sold through a vending machine beginning January 1, 2018. However, the exemption would not apply to all food sold through vending machines.

According to the fiscal analysis, enactment of HB 1013 could reduce sales tax collections by $2.3 million in FY 2018, $5.7 million in FY 2019, and $5.8 million in FY 2020. These figures assume that candy, soft drinks, and other items currently taxable under Indiana law would remain taxable. In other words, the exemption for food sold through vending machines would only apply to items that are exempt when sold through other means. The list of food that would become exempt if HB 1013 is enacted includes:

  • Bottled water
  • Chips
  • Crackers
  • Cookies
  • Ice cream
  • Milk
  • Trail mix

“Beverages containing 50% fruit or vegetable juice” are also on that list, and if HB 1459 is enacted, presumably beverages qualifying for that exemption would also be exempt when sold through a vending machine.

HB 1013 resoundingly passed the House in an 83–11 vote and is now under consideration in the Senate Committee on Commerce and Technology.

Changes in product taxability illustrate one reason why sales and use compliance can be so complex. Tax automation software helps simplify sales and use tax compliance for vendors in all states. Learn more.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.