Taxes on Vending Machines

Taxes on Vending Machines https://wahospitality.org/wp-content/uploads/2016/05/shutterstock_382111546.jpg

Should sales tax be collected when sales are made through a vending machine?

Retail sales tax applies to sales of merchandise that is sold through a vending machine. Gross receipts are subject to retailing B&O tax.

Merchandise includes items such as cigarettes, toiletries and toys, but does not include food and food ingredients.

The person that owns the machine should report and pay the tax. The owner may back out the amount of sales tax from the total amount received in the machines to arrive at the gross taxable amount. Example: The total amount received in the machine is $200. The tax rate is 8.4 percent. The gross taxable amount subject to retail sales tax and retailing B&O tax is $184.50 ($200/1.084 = $184.50).

What about hot food and soft drinks?

Sales of hot food such as coffee, chocolate, tea, soups, etc. and soft drinks are subject to sales tax. The amount of sales tax may be backed out of the total amount received to arrive at the gross taxable amount.

Example: The gross receipts in the machine are $200. The tax rate is 8.4 percent. The gross taxable amount subject to retail sales tax and retailing B&O tax is $184.50 ($200/1.084 = $184.50).

Are candy and bottled water taxed?

As food or food ingredients, bottled water and candy are subject to sales tax on 57% of the gross receipts when sold through a vending machine.

Example: Gross receipts from the vending machine equal $100. Tax rate is 8.4 percent. Total taxable amount subject to retail sales tax is $57 ($100 x 57 percent = $57). The amount subject to retailing B&O tax is $95.21 ($100.00- $4.79 sales tax on $57). $ 38.21 should be deducted under the retail sales tax category as an exempt food sale.

References: WAC 458-20-187 and WAC 458-20-244

Download DOR’s Vending Machine Worksheet here.

 

 

Rev. 12/14/14

 


This article is an excerpt from the Handbook for Excellent Restaurant Operations (HERO), published by the Washington Hospitality Association.  Want a hard copy of the whole manual?  It’s one of the many benefits of becoming a member!  Find out more about joining the Washington Hospitality Association here.

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