Were 25-cent gum and candy sales exempt when a commercial vendor's machines displayed a qualified charity's sponsorship message?

Subject

Vending Machines/Non-Profit Organizations

Plain-English summary

The commercial vendor's gum and candy sales for 25 cents or less were exempt because the coin-operated machines were sponsored by a qualified section 501(c)(3) charity. The reviewed agreement authorized use of the charity's name, logo, stickers, and public-service message in exchange for a monthly per-location royalty.

The exemption applied as of the amended December 8, 1993 agreement. Florida expressly warned that the ruling did not cover sales after termination of the charity-vendor agreement.

What this means for you

The vendor itself did not need to be the nonprofit. The result depended on the qualifying nonprofit sponsorship, covered vending price and products, and an active agreement.

Common questions

Did donated machine space establish the exemption? It was part of the facts, but the ruling relied on the qualifying nonprofit sponsorship rule.

Did the commercial vendor still need Florida registration? Yes. The ruling stated that vending-machine operators had to register.

What ended the ruling's protection? Termination of the sponsorship agreement.

Citations and references

• Fla. Stat. §§ 212.08(7)(z) and 213.22
• Fla. Admin. Code r. 12A-1.044(8)(c)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-010

Original ruling text

Title:

Vending Machines/Non-Profit Organizations

Jan 24, 1994

Re: TAA 94A-010
Sales Tax; Sales of gum and candy for 25 cents through
vending machines sponsored by XXX
Section 212.08(7)(z), F.S.
Rule 12A-1.044(8)(c), F.A.C.

Dear:

This is in response to your letter dated November 1, 1993,
which seeks the issuance of a Technical Assistance Advisement on
the above referenced issue. Accompanying your request is a
letter dated October 6, 1993, which discloses that the bulk
vending machines operated by XXX [hereafter "Firm"] are
sponsored by the XXX [hereafter "Charity"]. Additionally, you
have enclosed correspondence dated October 27, 1993, in which
XXX of this department cited passages from Rule 12A-1.044,
F.A.C., concerning the tax exemption granted on sales of food or
drinks for 25 cents or less through coin-operated vending
machines sponsored by nonprofit corporations qualified under s.
501(c)(3) or s. 501(c)(4) of the U.S. Internal Revenue Code of
1986, as amended.

As disclosed during our telephone conversation on
Wednesday, December 1, 1993, your firm will sell gum and candy
through coin-operated vending machines for 25 cents each. The
firm will not pay any money to the location owners for the use
of their property; all space is donated by the location owner.
Additionally, it was disclosed that an application for sales and
use tax registration (Form DR-1) had recently been submitted to
this department. As you know, before any person may operate an
amusement or vending machine in this state, such person must
register with this department.

Upon request, a copy of the Commercial Vendor's Agreement

entered into by you and Charity was submitted to this writer for
review. The agreement, which was entered into on October 25,
1993, provides in pertinent part:

"1. The VENDOR agrees to display the [Charity] public
service message on each piece of its Commercial Vending
Equipment. VENDOR will use its best efforts to obtain
commercial locations and assistance in placement of Equipment
bearing the service message. Nothing in this Agreement shall be
construed to create a partnership or joint venture or similar
enterprise between VENDOR and [Charity], or [Charity] and the
Agent Marketing Equipment to the VENDOR.
"2. [Charity] grants VENDOR the right to use the name and
logo of [Charity] in the form provided by [Charity] to place on
the Equipment of the VENDOR. [Charity] will provide the VENDOR
with a Letter of Authorization (LOA), service message stickers
with the [Charity] logo and, make available a price list of
sample materials, if requested, of other information material
approved by the Association.
"3. VENDOR may represent to owners and operations of
commercial space and/or government installations. [Charity] has
authorized the VENDOR to enroll owners and operators to
participate in facilitating display of the service message, and
the VENDOR will make monthly financial royalty remittances to
[Charity] in accordance with this Agreement....
"7. VENDOR agrees to remit [Charity] a monthly royalty fee
above, for use of the stickers and VENDOR has the option of
remitting in advance the agreed-upon fee. Unless otherwise
agreed, a sum per location per unit is due each 30 days....
"8. VENDOR shall be responsible fully for obtaining
appropriate locations for each placement of equipment bearing
the HELP US HELP OURSELVES service message. VENDOR shall also
be responsible for the maintenance and on-going operation by
servicing the client in a manner associated with good business
practices. In the event [Charity] deems action is required for
failure of the VENDOR to perform on a timely basis under the
terms of this Agreement, [Charity] may elect to notify each
individual location of its intention to withdraw its
participation and the HELP US HELP OURSELVES service
message...."

As contained in the above referenced document, Firm will
remit a monthly fee in the amount of $1.50 to Charity for each
location displaying Charity's sticker(s). On December 8, 1993,
this writer received a facsimile transmission of an amended
Commercial Vendor Agreement (dated December 8, 1993). The
revised Agreement lists "XXX/[Firm]" as the "Vendor".

As correctly cited in XXX letter dated October 27, 1993,
Rule 12A-1.044(8)(c), F.A.C., exempts from sales tax the sale of
food or drinks through a coin-operated vending machine for 25
cents or less when the machine is sponsored by a nonprofit
corporation qualified under s. 501(c)(3) or s. 501(c)(4) of the
U.S. Internal Revenue Code of 1986, as amended. The Commercial
Vendor's Agreement submitted for review provides that the
machines' sponsor received its s. 501(c)(3) designation on June
20, 1970.

As of December 8, 1993, Firm's machines are sponsored by an
organization qualified under s. 501(c)(3) of the U.S. Internal
Revenue Code. Therefore, sales made by Firm of gum and candy
for 25 cents or less through vending machines sponsored by
[Charity] are exempt from tax. Please be advised that this
response is not applicable to any sales made by Firm should the
Agreement between [Charity] and Firm be terminated.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to

identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Betsy Turner
Technical Assistant

BT/
Control # 11813