Sales Tax on Vending Machine Sales

PURPOSE: Section 144.021, RSMo, imposes a tax on a seller’s gross receipts. Section 144.012, RSMo, provides the method for determining gross receipts and the applicable local tax for sales of tangible personal property through vending machines. This rule also addresses the purchase of vending machines under section 144.518, RSMo. This rule does not address receipts from amusement devices. (1) In general, sales of tangible personal property, other than photocopies and tobacco products, through vending machines are subject to tax based on one hundred thirty-five percent (135%) of the net invoice price of the tangible personal property. The applicable tax rate is the rate in effect at the location of the vending machine. Sales of photocopies and tobacco products are subject to tax on their retail sales price. Purchases of machines or parts for machines used in a commercial vending machine business are not subject to tax if tax is paid on the gross receipts derived from the sale of the tangible personal property through the vending machines. (2) Definition of Terms. (A) Net invoice price—the cost of the product, including freight, less any quantity or timely payment discounts allowed by the supplier, with no allowance for spoilage or loss. (B) Vending machine—a coin or currency operated device that is used to sell tangible personal property without requiring the vendor’s physical attention at the time of the sale. The term vending machine is not limited to mechanically operated devices and includes honor boxes. (C) Vendor—the person who owns the property sold through a vending machine. (3) Basic Application of Tax. (A) The vendor must report and remit sales tax on one hundred thirty-five percent (135%) of the net invoice price of the tangible personal property purchased for sale through vending machines. The vendor must report and remit sales tax for the period in which the items are sold or in which the items are removed from inventory due to spoilage or loss. (B) Sales of tangible personal property through vending machines located outside Missouri are not subject to tax. (C) Sales of tangible personal property through vending machines located on the premises of religious organizations, charitable organizations and public elementary and secondary schools are not subject to tax. (D) A vendor with multiple machines or locations may compute taxable sales for each machine or location either by specifically identifying the net invoice price of the items sold through each machine or by using an apportionment method. An apportionment method calculates taxable sales for each individual location by first determining the percentage of gross sales attributed to each location. This percentage is then applied to the net invoice price of the tangible personal property vended and allocates the same percentage to the location(s). (E) A manufacturer that sells its manufactured product at retail through vending machines and wholesale to other vendors must self-assess tax on its vending machine sales at one hundred thirty-five percent (135%) of the average price at which the product is sold to other vendors. A manufacturer who sells its manufactured products to the public through vending machines and does not make any sales to other purchasers or vendors must self-assess tax on its vending machine sales at one hundred thirty-five percent (135%) of the total cost of the manufactured products, including materials, labor and manufacturing overhead. (F) No allowance, credit or refund of sales tax is allowed for spoilage or loss, such as from breakage or theft. (G) The taxable receipts from a vending machine are subject to the sales tax at the rate in effect at the location of the machine. (H) Sales of qualifying food through vending machines are subject to the reduced food tax rate. See 12 CSR 10-110.990. (I) Purchases of machines or parts for machines used in a commercial vending machine business are not subject to tax if tax is paid on the gross receipts derived from the sale of the tangible personal property through the vending machines. (4) Examples. (A) A vendor purchases tangible personal property for a gross price of $10,000 to sell in its vending machines. The vendor’s supplier allows the vendor a 2% timely payment discount of $200 as well as a 5% quantity discount of $500. The net invoice price of the tangible personal property is $9,300 ($10,000 minus $700 total discounts). The amount subject to sales tax is $12,555 ($9,300 net invoice price multiplied by 135%). The vendor sold all the products for $20,000. The vendor has vending machines located at a retail store and at an exempt public elementary school. The sales at the school were $5,000 (25% of gross sales) and the sales at the retail store were $15,000 (75% of gross sales). The gross receipts for the exempt location are $3,138.75 ($12,555 multiplied by 25%) and for the taxable location are $9,416.25 ($12,555 multiplied by 75%). (B) A vendor has vending machines located on the premises of taxable organizations. The machines are located both in the city of Columbia and rural Boone County. The Columbia machines provided 60% of the vendor’s gross sales and the rural Boone County machines provided 40% of gross sales. The vendor must report and remit tax on 60% of his gross receipts at the sales tax rate in effect for Columbia and on 40% at the sales tax rate in effect for Boone County. (C) A commercial vending business purchases a vending machine and places the machine in an exempt church. The business must pay tax on the purchase price of the machine because it will not pay tax on the receipts from the machine. The machine is later moved to a gas station and tax is paid on 135% of the net invoice price of the goods sold from the machine. The subsequent purchases of repair parts for the machine are exempt. (D) A commercial vending business purchases ten new vending machines. Six of the machines are placed in grocery stores and other commercial enterprises open to the general public. Four are placed in schools and churches. The purchase of the six machines is not subject to tax because the business will pay tax on the receipts from the machines. The purchase of the four machines is subject to tax because the business will not pay tax on the receipts from the machines. (E) A commercial vending business purchases a vending machine and places the machine in a gas station. The purchase of the machine is not subject to tax because the business will pay tax on the receipts from the machine. The machine is later moved to a church. The subsequent purchases of repair parts for the machine are subject to tax. (F) A newspaper sold through a vending machine is subject to tax at 135% of the average price charged to retail sellers. AUTHORITY: section 144.270, RSMo 2000, and 144.518, RSMo Supp. 2007.* Original rule filed May 1, 2006, effective Nov. 30, 2006. Emergency amendment filed Aug. 14, 2007, effective Aug. 28, 2007, expired Feb. 23, 2008. Amended: Filed Aug. 14, 2007, effective Feb. 29, 2008. *Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961 and 144.518, RSMo 1999, amended 2005, 2007.