Did a snack seller using unattended honor boxes have to hold a permit and collect Texas sales tax?

Plain-English summary

A seller distributing snacks through an unattended “honor system” was a vendor and needed a Texas sales tax permit. The Comptroller treated those sales, along with sales through a Showcase Jr. machine, as vending-machine sales.

The entire snack price was taxable and had to include the tax under Rule 3.293(g). When the seller sold snacks to bars, video stores, newsstands, or other businesses for resale, it still had to collect tax unless the customer supplied a valid, properly completed resale certificate.

Common questions

Did the unattended honor system avoid vendor status? No.

Was the tax added outside the displayed snack price? The letter said the total price was taxable and had to include the tax.

Could a reseller buy without paying tax? Yes, with a valid resale certificate.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8907L0943D02

Original ruling text

July 7, 1989

Dear ***:

I apologize for the very long delay in responding to your letter regarding your
responsibilities as a seller of snack products through the honor system. The
response required verification by our Taxability Section of Legal Service.

Your first question is whether you are considered a vendor and are responsible
for collecting and remitting sales taxes on these items. Yes, on both issues.
You explained that you had been paying sales tax on all items sold. You are a
vendor (seller) and should have a sales tax permit and collect and remit tax
according to the provisions of the rules relating to seller's responsibilities
and to food sales. I have enclosed these and other rules for your information.

The snacks sold through the "honor system" as well as the snacks sold through
the Showcase Jr. (vending machine) are considered to be sold thorough vending
machines. The total sales price of these items are taxable and the price must
include the tax. You should refer to Rule 3.293 section (g) for instructions
on collecting and remitting the sales tax.

You also questioned your responsibility when selling to bars, video stores,
newsstands, etc. who will in turn resale the snacks to their customers. You
should refer to Rule 3.286 and rule 3.285 for guidelines covering these sales.
Basically, you should collect the tax unless your customer provides a properly
completed and valid resale certificate in lieu of the tax.

This opinion is based on the facts presented. If there are additional or different
facts, the opinion may change.

You may write Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence