Was an honor-system candy box a vending machine eligible for California's low-price or nonprofit vending rules?

Plain-English summary

A nonprofit placed candy in unattended boxes. Customers deposited ten cents and manually removed their selection. The organization argued the boxes were like vending machines and sought the low-price food or nonprofit vending treatment.

California rejected the analogy. A vending machine responds to inserted money by physically releasing the goods. The candy box was only a container and did not dispense anything mechanically.

Because the candy was not dispensed through a vending machine, sections 6359.4 and 6359.45 did not apply. Counsel noted the organization could consider tax-included pricing under Regulation 1700.

What this means for you

Nonprofit sellers, honor-box operators, and vending advisers

Focus on the mechanism, not the unattended location. A customer-accessible container is not a vending machine unless it actually releases property in response to payment.

Common questions

Q: Was the candy box a vending machine?

A: No.

Q: Why not?

A: It did not mechanically dispense goods after coins were inserted.

Q: Could the seller post tax-included pricing?

A: Yes, the letter pointed to Regulation 1700.

Citations and references

• California Revenue and Taxation Code §§ 6359.4 and 6359.45
• California Sales and Use Tax Regulations 1574 and 1700

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 590.0090
• Original supporting opinion: 590.0090 PDF

Original ruling text

590.0090
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-5550

March 17, 1992

Mr. REDACTED TEXT
Attorney at Law
RE:

REDACTED TEXT
SR JH REDACTED TEXT

Dear Mr. REDACTED TEXT:
As you know, your letter dated March 3, 1992 to our Santa Rosa District Office has been referred to the Legal Division for response. You inquire as to the application of tax to your client’s business. Your client is a nonprofit organization who sells candy out of boxes. You explain: “The position maintained by our client is that the boxes are akin to a vending machine in that the purchaser of the candy deposits 10 cents into the box and withdraws the candy of his own selection. Further, the similarity of our client’s box and the vending machine is that there is no one on site that can collect any sales tax.” You believe that your client is a consumer of the candy sold from the box under Revenue and Taxation Code section 6359.4 (sales of food products, including candy and confectionery, from a vending machine for fifteen cents or less), or alternatively, under Revenue and Taxation Code section 6359.45 (sales of property from a vending machine for fifteen cents or less by a nonprofit organization). Application of sales tax to sales of property through vending machines is discussed in Regulation 1574, a copy of which is enclosed. Subdivisions (b)(1)(B) and (b)(1)(C) state that the statutory provisions you cite apply when the property in question is “dispensed” through vending machines. While there may be similarities between your client’s sales out of a box and sales through vending machines, the box in question is not a vending machine but rather a container. The dictionary definition of “vending machine,” which coincides with the common understanding of a vending machine, is “a machine that dispenses small goods upon the deposit of a coin or coins in a slot.” (See American Heritage Dictionary of the English Language (1988) 1420. See also Webster’s New World Dictionary, Third College Edition (1969) 985.) That is, a vending machine responds to the insertion of money by dispensing (i.e., physically releasing) the goods sold through the machine.

Mr. REDACTED TEXT

-2-

March 17, 1992
590.0090

We conclude that the boxes about which you inquire are not vending machines within the meaning of sections 6359.4 and 6359.45. Your client may wish to sell the items on a tax included basis. This is explained in Regulation 1700, a copy of which is enclosed. (See also reg. 1574(a).) If you have further questions, feel free to write again. Sincerely,

David H. Levine
Senior Tax Counsel

DHL:cl
0647E
Enclosures
bc:

Santa Rosa District Administrator