Could a vending-machine operator obtain a refund of Texas sales tax remitted on newly exempt 25-cent bulk-vending sales?

Plain-English summary

A vending-machine operator sought a refund of tax remitted for the last quarter of 1989 and first quarter of 1990 after learning of an exemption for sales of food, gum, or candy for 25 cents or less from a bulk vending machine. The operator owned snack machines that sold items for 25 cents each.

The Comptroller said the refund depended on whether the operator absorbed the tax or backed it out of receipts. If the operator paid tax on gross receipts without collecting it from customers, the operator had absorbed it and could receive a refund.

If the operator backed tax out of the receipts, the operator had collected that tax from customers. In that case, the customers had to be refunded before the Comptroller could refund the remitted tax to the operator.

What this means for you

Records showing how tax was calculated and whether customers bore it controlled the refund process described in the letter. The Comptroller requested documentation showing whether tax was paid on gross receipts or backed out of them.

Common questions

What did “absorbed” tax mean here? The operator remitted tax from gross receipts without collecting it from customers.

What did “backed out” tax mean? The operator treated part of its receipts as tax collected from customers.

Could backed-out tax be refunded directly to the operator? Not first. The letter required the operator to refund the customers before receiving a refund from the Comptroller.

What sales did the described exemption cover? Sales of food, gum, or candy for 25 cents or less from a bulk vending machine.

Citations and references

The letter did not cite a statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9101L1079G04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller January 15, 1991

Dear *:

This is in response to your recent letter regarding a possible refund
of sales tax collected on vending machine sales.

You stated that you did not become aware of a recent exemption on the
sale of food, gum, or candy for $.25 or less from a bulk vending ma-
chine until April, 1990. COMPANY R owns only the easy-vend snack ma-
chines which vend for $.25 each. You have specifically requested a
refund of sales tax which was remitted on your sales tax return for
the last quarter of 1989 and the first quarter of 1990.

In order to consider your refund request, it must be determined whe-
ther you absorbed the tax or you backed the tax out of your receipts.
If you remitted the tax on your gross receipts and did not collect
tax from your customers, then you absorbed the tax. If your records
show that the tax was paid on your gross receipts and not collected
from your customers, the tax you remitted to this office can be re-
funded.

If you backed the tax out of your receipts, then you collected the tax
from your customers. If the tax was collected from your customers, the
tax must be refunded to those customers before the tax you remitted to
this office can be refunded to you. Please provide information which
documents whether tax was paid on gross receipts or backed out of the
gross receipts.

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

If you have any questions or need additional information, you may call
me toll free at 1-800-252-5555, extension 5-0330. The regular number
is 512/463-4600, or write me at Tax Administration.

Sincerely,
Bettie U. Peterson
Tax Administration Division