Were hot beverages or hot bakery goods from vending machines taxable when eating facilities were provided?

Plain-English summary

California addressed hot beverages and hot bakery goods sold through vending machines for more than 15 cents and consumed at facilities provided by the machine operator or a contracting host.

The letter found the gross receipts taxable. Although separate-price bakery goods and beverages were not automatically taxable as hot prepared food, another subdivision denied the food exemption when consumption facilities such as tables, chairs, counters, trays, glasses, dishes, or tableware were supplied.

The opinion emphasized that this particular vending result still depended on the presence or absence of eating facilities.

What this means for you

Hot-food vending operators and facility hosts

Historical thresholds have changed, but facility facts remain important in food-tax analysis. Inventory who supplies seating, counters, tableware, and other consumption amenities.

Common questions

Q: Were the described hot vending sales taxable?

A: Yes.

Q: What fact drove the result?

A: Consumption facilities provided by the operator or contracting host.

Citations and references

• Former California Revenue and Taxation Code § 6359(b) and (e)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 590.0070
• Original supporting opinion: 590.0070 PDF

Original ruling text

590.0070
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
February 26, 1973
Attention:

REDACTED TEXT
Controller

Gentlemen:
On March 24, 1972 we wrote to you regarding vending machine sales and enclosed the lists you had submitted to us for completion. It has recently been called to my attention that there is one rather off situation that is not covered in your lists, presumable because REDACTED TEXT has not such sales through vending machines. We thought we would call the situation and our conclusion to your attention in case REDACTED TEXT makes such sales in the future. The question involved is as follows: Does sales tax apply to sales of hot beverages or hot bakery goods sold through a vending machine for more than $.15, if the hot beverages or hot bakery goods are consumed at facilities provided by the vending machine operator or by a person with whom the vending machine operator contracts to sell food products to others? We have concluded that the gross receipts from such sales are subject to sales tax. The oddity is that this is a vending machine situation in which the tax result still turns on the presence or absence of facilities, e.g., tables, chairs, counters, trays, glasses, dishes, or other tableware. The legislation in regard to cold food products sold through a vending machine, and hot food products generally, is thought by some persons to have done away with the facilities distinction. Yet section 6359 states that subdivision (e), which results in tax applying to sales of hot prepared food products, does not apply to a sale for a separate price of bakery goods or beverages. Nevertheless, hot beverages and hot bakery goods are still hot food products, and there, not subject to the 33 percent rule applying to sales of cold food products through a vending machine. At this point, the sale of hot beverages or hot bakery goods would seem to be exempt, but this is so, only if none of the subdivisions of section 6359 apply so as to deny the exemption. Therefore, when subdivision (b) is applicable, sales tax applies. Very truly yours, Donald J. Hennessy Tax Counsel