Was advertising delivered through free public-use machines taxable, and were the machines treated as vending machines?

Plain-English summary

Coin-free public machines displayed paid advertising and sometimes dispensed literature, coupons, or maps. The Comptroller said they were not vending machines and the advertising service was not taxable.

The provider still owed tax on the machines, promotional materials, and other taxable business inputs. No Texas sales-tax permit was required for the described service, though local permits could apply.

What this means for you

Nontaxable service revenue did not exempt the equipment and materials used to provide it.

Common questions

Were the machines vending machines? No. Was the advertising taxable? No. Were the provider's inputs exempt? No.

Citations and references

• No numbered statute or rule was cited.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1038B14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller August 17, 1990

Dear *****:

Thank you for your letter of July 20, 1992, concerning your company's
Texas sales and use tax responsibilities.

You will be providing advertising services through machines which are
operated by the general public. The machines do not require coins to
be operated or used. You will sell advertising to clients which may
be viewed by the user. Some machines may dispense promotional litera-
ture, coupons, or maps. These machines are not considered vending
machines for sales tax purposes.

Advertising or advertising space sold to your clients is not taxable.
However, you will be required to pay sales and use tax on all pur-
chases of advertising materials or promotional literature used in
your business operations.

These machines are not considered vending machines for sales tax
purposes.

Texas sales and use tax is also due on the purchase of the machines
and any other taxable items used in providing your services.

You are not required to have a Texas sales and use tax permit to pro-
vide these services. However, you should contact each city or county
in which you plan to place a machine to get information concerning
applicable permits and/or licenses.

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

You may call toll free 1-800-252-5555 if you have any questions or
need more information. You may write to Tax Correspondence, Comptrol-
ler of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence