Were 25-cent candy sales from coin-operated machines sponsored by a section 501(c)(3) organization exempt?

Plain-English summary

A vending operator sold candy for 25 cents or less through coin-operated machines under a written sponsorship agreement with a section 501(c)(3) organization. The operator paid the sponsor a stated monthly amount per machine and displayed the sponsor's name and address on each machine.

Florida found the qualifying candy sales exempt. The statute and rule exempted food or drink for human consumption sold for 25 cents or less through a machine sponsored by a section 501(c)(3) or 501(c)(4) nonprofit.

The exemption applied while the sponsorship agreement remained in effect. If the operator had remitted tax on exempt sales in error, it could pursue the refund process and amend its reporting as described in the ruling.

What this means for you

The exemption depends on the price, product, qualifying nonprofit sponsorship, and machine identification requirements. A charitable payment by itself is not a substitute for meeting those conditions.

Common questions

Did the exemption apply only to the money paid to the sponsor? No. The ruling treated the qualifying vending sales as exempt while the sponsorship agreement was effective.

What had to appear on each machine? The qualified sponsoring organization's name and address.

Could tax paid on exempt sales be recovered? The ruling said the operator could seek a refund using the prescribed process, subject to the stated filing period and documentation.

Citations and references

• Fla. Stat. § 212.08(7)(z) (nonprofit-sponsored vending-machine food and drink sales)
• Fla. Admin. Code r. 12A-1.044(2)(b) (price, sponsorship, and machine-label requirements)
• Fla. Stat. § 215.26 (refunds of taxes paid in error)
• Fla. Admin. Code r. 12A-1.014 (sales-tax refunds and credits)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-017

Original ruling text

SUMMARY
QUESTION: Are sales of candy sold for 25 cents or less through coin-operated vending machines sponsored by a
501(c)(3), I.R.C., organization exempt from sales tax?
ANSWER - Based on Facts Below: Yes. Sales of food and drinks sold for human consumption for 25 cents or less
through coin-operated vending machines sponsored by a nonprofit corporation under s. 501(c)(3) or (c)(4) of the
Internal Revenue Code of 1986, are exempt.

June, 2006

Re: Technical Assistance Advisement 06A-017
FEI#: XX
FEI#: XX
Sales and Use Tax
Vending Machines Sponsored by Nonprofit Organization
Section 212.08(7)(z), Florida Statutes
Rule 12A-1.044(2)(b), Florida Administrative Code
Dear:
This response is in reply to your letter dated XX, requesting the Department’s issuance of a Technical Assistance
Advisement ("TAA") pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the Department's
position on food or drinks sold for XX cents or less through XXX sponsored by a nonprofit organization. An
examination of your letter has established that you have complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting your request for issuance of a TAA.
Facts
Your letter provides in pertinent part:
[Vendor] owns and operates XXX machines that [dispense] a handful of candy such as XXX, etc. for XX cents. Our
operations are sponsored by [a] non-profit s. 501(c) organization, [Sponsor], whereby we give a portion of our
collected receipts to this organization every month via a written agreement. All our vending machines display the
name, website, and telephone number of this organization.

We have sent a letter dated XX to the Department of Revenue (hereinafter "Department") requesting an opinion on
whether the exemption applies to all receipts or only the receipts that are given to our sponsor. We have received a
response letter from the Department dated XX that indicates neither the [statute] nor the rule provides that all receipts
from the qualified vending machines must be given to the nonprofit organization in order for the exemption in s.

212.08(7)(z), [F.S.], and [Rule]12A-1.044(2)(b)[, F.A.C.,] to apply. Accordingly, all receipts from the machines would
be exempt, provided the requirements of the cited statute and rule are met. In addition, the Department has also sent
us a credit memo to receive a refund from the past sales tax we already paid. However, the Department's letter is the
opinion of the writer, not an official statement.

The following documents were provided for review:

1. Letter addressed to the Department of Revenue dated XX
2. Letter of Technical Advice dated XX
3. Sponsor Agreement
4. Sponsor information affixed to machines
5. Credit Memo for collection period XX
   The sponsor agreement provides the following in pertinent part:
   This contract is made the XX day in the month of XX, XXX between [Vendor] ...and [Sponsor] ...
   WHEREAS, the Vendor will operate a vending business selling XXX via small vending machines (hereinafter
   "Equipment" or "Machines") that are placed by the Vendor at various local businesses.
   WHERAS, the Sponsor agrees to allow the Vendor to display the Sponsor's name, logo, phone number, and website
   (hereinafter "Advertising Information") to promote the Sponsor's organization on all the Equipment.
   NOW, THEREFORE, both parties agree to the following:
6. The Vendor will be the sole owner of all the Equipment, and shall be responsible for their installation and
   maintenance.
   2.The Vendor will create and maintain all Advertising Information for the Sponsor at XXX. All Advertising Information
   cannot be changed, altered, or displayed by the Vendor without the prior consent from the Sponsor. The Vendor can
   display the advertising Information on the Equipment in any[ ]way the Vendor deems appropriate without the consent
   from the Sponsor.
7. In return for displaying the Advertising Information, the Vendor agrees to pay the Sponsor in good faith XXX (XXX)
   XXX for each placed Machine. This payment will be made to the Sponsor regardless of the amount of gross income
   each Machine generates....
8. The Sponsor acknowledges that each monthly payment can increase or decrease from the prior month depending

on if additional machines are placed, or if placed Machines are removed from a location due to low profitability,
vandalism, repairs, or if a Machine is stolen. If any Machine is removed ...Vendor will pay the Sponsor one last
payment for those Machines....

7. The term of this Agreement is indefinite between the two parties. However, either party can terminate this
   Agreement on the last day of any month without reason or cause.

The copy of the sponsor information that you provided, which you affix to the machines, contains the sponsor's name,
telephone number, and website.
On June 20, 2006, I contacted you by telephone to clarify if your sponsor was qualified as a 501(c)(3) or (4)
organization, as you did not specify in your letter. On June 26, 2006, you faxed a statement that your sponsor is a
section 501(c)(3), I.R.C., organization.
Requested Advisement
You ask if sales of XXX through your coin-operated vending machines qualify for the exemption granted by Section
212.08(7)(z), F.S.
Applicable Authority
Section 212.08(7)(z), F.S., provides:
(z) Vending machines sponsored by nonprofit or charitable organizations.--Also exempt are food or drinks for human
consumption sold for 25 cents or less through a coin-operated vending machine sponsored by a nonprofit corporation
qualified as nonprofit pursuant to s. 501(c)(3) or (4) of the Internal Revenue Code of 1986, as amended.
Rule 12A-1.044(2)(b), Florida Administrative Code, interprets the statute and provides:
(b) Food and drinks sold for human consumption for 25 cents or less through a coin-operated vending machine
sponsored by a nonprofit corporation under s. 501(c)(3) or (4) of the Internal Revenue Code of 1986, as amended, are
exempt. The name and address of the qualified sponsoring organization must be affixed to each machine used for
this exempt purpose. (Emphasis Supplied)
Response
As provided in the tax law and rule cited above, sales of food or drinks for human consumption sold for 25 cents or
less through coin-operated vending machines that are sponsored by a nonprofit corporation under s. 501(c)(3) or (4)
of the Internal Revenue Code are exempt. According to the Sponsor Agreement, Vendor will pay Sponsor $1.50 for
each machine on which Sponsor's information is displayed. In addition, you have indicated that Sponsor is qualified as

a section 501(c)(3), I.R.C., organization. Therefore, Vendor’s sales of candy for 25 cents or less through the coinoperated vending machines sponsored by Sponsor, a section 501(c)(3), I.R.C., organization, are exempt from sales
tax. This exemption applies only while the agreement between Vendor and Sponsor is in effect.
Additionally, Rule 12A-1.044(2)(b), F.A.C., requires that the name and address of the sponsoring organization be
affixed to each machine. The copy of the sponsor information that you provided, which is currently displayed on the
machines, does not contain the address of the sponsoring organization. This oversight must be corrected.
You indicate in your letter that you received a credit memo resulting from "past sales tax ... already remitted." Please
refer to your copy of the credit memo which provides "Our records indicate your Sales and Use tax Return ... does not
agree with our calculations." Your return for the collection period ending XX, shows that you reported Gross Sales on
Line A in the amount of XX. You did not provide figures for exempt sales, taxable amount, or tax collected, but did
report an amount of XX for lawful deductions. In addition, you sent a check for XX. Since you did not provide figures
for exempt sales or taxable amount, the Department calculated the tax collected based on the gross sales figure you
provided, which resulted in tax due of XX. The Department offset the tax due of XX with the lawful deduction you
reported of XX, which resulted in the tax due being zero. Given that the Department calculated the total tax due to be
zero, a credit memo was issued for the XX that you remitted with your return.
Returns filed incorrectly can be corrected by filing amended returns for each collection period for which an inaccurate
return was filed. When filing your amended return(s), be advised that food and beverage vending sales are reported
on Line E, not Line A. Sales qualifying for the exemption discussed above should also be reflected in the exempt
sales section of your return. Section 215.26, F.S., authorizes a refund of taxes paid into the State Treasury in error
and provides that an application for refund must be filed within three years for taxes paid on or after July 1, 1999.
Based on the provisions of Rule 12A-1.014, F.A.C, if you have remitted tax on exempt sales in error, you may seek a
refund from the Department by submitting Form DR-26S, Application for Refund - Sales and Use Tax. A copy of Form
DR-26S, Application for Refund - Sales and Use Tax, is enclosed. Supporting documentation, such as amended
returns, must be sent with the refund application. The completed application should be sent to Florida Department of
Revenue, Refunds Sub-Process, P.O. Box 6490, Tallahassee, Florida, 32314-6490. If you require assistance
completing amended returns or the refund application, please call the Department's toll free tax information line at 1800-352-3671.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the
Department only under the facts and circumstances described in the request for this advice as specified in Section
213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised
that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which
this advice is based, may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records under
Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential
information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this
response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your

response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Heather S. Miller
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-4835
HSM/
Enclosure
Ctrl# 21601