[61 PA. CODE CH. 31]
Sales and Use Tax; Vending Machines
[29 Pa.B. 3738]
The Department of Revenue (Department), under authority contained in section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), proposes to amend § 31.28 (relating to vending machines and automatic sales devices) to read as set forth in Annex A.
* Prior to October 1, 1991, § 31.28 provided that the sale of food and beverages and taxable tangible personal property from a vending machine was taxable; however, the sale of candy and gum from a vending machine was exempt.
* With the enactment of the act of August 4, 1991 (P. L. 97, No. 22) (Act 22), effective October 1, 1991, vending machines were considered to be eating establishments and the sale of food and beverages and taxable tangible personal property from a vending machine was taxable; however, the sale of candy and gum from a vending machine was exempt.
* With the act of December 13, 1991 (P. L. 373, No. 40) (Act 40), effective January 1, 1992, the term ''vending machine'' was removed from the definition of ''eating establishment''; however, the law provided that sales from vending machines continued to be taxed as they were prior to October 1, 1991, therefore the provisions of § 31.28 continued in effect.
* With this proposal, the regulation in effect prior to October 1, 1991, is withdrawn and replaced with a new regulation. With the act of April 23, 1998 (P. L. 239, No. 45) (Act 45), imposition of tax will only be on items that are considered taxable when sold from other noneating establishments. Vending machines are added to the list of establishments which are not considered to be establishments from which food or beverages ready to eat are sold. Since a vending machine does not qualify as an eating establishment, only the sale of selected food and beverage items in section 204(29) of the TRC (72 P. S. § 7204(29)) are taxable when sold from a vending machine. Taxable tangible personal property, other than food and beverages, is also subject to tax when sold from a vending machine. The sale of candy and gum from a vending machine continues to be exempt.
Explanation of Regulatory Requirements
This amendment proposes to delete the current provisions of subsections (a)--(e) of § 31.28. Proposed subsection (a) defines ''juice beverage,'' ''meal,'' ''operator,'' ''selected food and beverage items,'' ''soft drink'' and ''vending machine'' for purposes of this section. Proposed subsection (b) relating to registration provides that an operator who sells taxable tangible personal property or selected food and beverage items through a vending machine is required to obtain a sales, use and hotel occupancy tax license for the purposes of collecting and remitting tax to the Department.
Proposed subsection (c) requires that a sign or sticker stating the name and address of the operator be conspicuously displayed on the vending machine. Proposed subsection (d) explains the scope of taxation for the sale of tangible personal property and food or beverages from a vending machine.
Proposed subsection (e) provides that the sale of selected food and beverage items dispensed by means of a vending machine located on the premises of a school or church are exempt from tax provided the sales are made in the ordinary course of the activities of the school or church. The sale of tangible personal property other than food or beverages, dispensed by means of a vending machine located on the premises of a school or church, is subject to tax.
Proposed subsection (f) provides that sales tax collected by the operator upon taxable property, including selected food and beverage items, shall be reported and remitted to the Department. The current subsection (f) is relettered as subsection (g) and is amended to clarify the taxability of the purchase or lease of vending equipment and supplies.
The proposed amendment may affect vending machine operators.
The Department has determined that the proposed amendment will have no fiscal impact on the Commonwealth. Rather, it clarifies the Department's policy on the taxation of items dispensed from a vending machine.
However, the change in policy required by the Commonwealth Court decision in CRH Catering Co., Inc., v. Commonwealth, 539 A.2d 38 (Pa. Cmwlth. 1988) has had a negative impact on revenue. The policy has been in effect since the 1988-89 fiscal year. The fiscal impact of the change in policy was estimated to be about $0.4 million for fiscal year 1998-99.
The proposed amendment also sets forth the Department's interpretation of Act 45 which amended section 204(29) of the TRC relating to sales tax on sales from vending machines. This proposed amendment is estimated to reduce the fiscal year 1999-00 (the first full year of revenue loss) General Fund by $15.4 million.
The proposed amendment will not require additional paperwork for the public or the Commonwealth.
The proposed amendment will become effective upon final publication in the Pennsylvania Bulletin. The proposed amendment is scheduled for review within 5 years of final publication. No sunset date has been assigned.
Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed amendment to Anita M. Doucette, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days after the date of the publication of this notice in the Pennsylvania Bulletin.
Under section 5(a) of the Regulatory Review Act (71 P. S. 745.5(a)), on June 30, 1999, the Department submitted a copy of this proposed amendment to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. In addition to submitting the proposal, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposed amendment, it will notify the Department within 10 days of the close of the Committees review period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review of objections raised, prior to final publication of the regulation, by the Department, the General Assembly and the Governor.
ROBERT A. JUDGE, Sr.,
Fiscal Note: 15-408. No fiscal impact; (8) recommends adoption.
TITLE 61. REVENUE
PART I. DEPARTMENT OF REVENUE
Subpart B. GENERAL FUND REVENUES
ARTICLE II. SALES AND USE TAX
CHAPTER 31. IMPOSITION
§ 31.28. Vending machines [and automatic sales devices].
[(a) Vending or automatic sales. Tangible personal property otherwise taxable under the Sales and Use Tax Act (72 P. S. §§ 3403-1--3403-605) is taxable when dispensed by means of a vending machine or other automatic sale device.
(b) Identification requirement. Every machine used for the purpose of vending tangible personal property shall bear conspicuously thereon a sign or sticker setting forth the following information:
(1) The name and address of the owner of the merchandise contained within the machine and sold thereby.
(2) The charge made for the merchandise contained therein and sold thereby, indicating as separate items the charge made for the merchandise, the amount of tax imposed on the sale and the total amount of the sale including the tax.
(3) The Sales Tax License Number of the person liable for collection of the tax.
(c) The sign or sticker required by this section may be reproduced by any method, but shall be clearly legible and prominently displayed.
(d) Where articles of more than one price are sold by the same machine, the sales price, tax and total amount charged shall be clearly shown for each article or group of articles having a different price.
Example: THE NAME AND ADDRESS OF THE OWNER OF THE MERCHANDISE CONTAINED IN AND SOLD BY THIS MACHINE IS:
Joseph J. Jones
387 Parkside Drive
Philadelphia 7, Pa.
SALES PRICE OF ARTICLE SOLD 23 CENTS SALES TAX PAYABLE 2 CENTS TOTAL AMOUNT CHARGED 25 CENTS SALES TAX LICENSE NUMBER
(e) Sales tax shall be paid by the vendor on the sale or use of food and beverages dispensed by means of a vending machine or other automatic sales device at the rate of 6% of the gross receipts collected from the machine under section 202(d) of the TRC (72 P. S. § 7202(d)). Thus, if the receipts from a machine total $100, the amount of tax that is remitted to the Commonwealth by the vendor is $6.]
(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:
Juice beverage--A liquid beverage containing at least 25% by volume natural fruit or vegetable juice.
Meal--A variety of foods prepared for immediate consumption and sold as a single item.
Operator--A person who makes sales of tangible personal property, including food or beverages, primarily through a vending machine.
Selected food and beverage items--Soft drinks; meals; hot or cold sandwiches, including cold meat sandwiches, cheese sandwiches, hoagies, hot dogs, hamburgers and similar sandwiches; brewed coffee; hot beverages such as hot chocolate, hot tea and similar items; food from salad bars; pizza, soup and other food items dispensed from the vending machine in a heated form or which are served in cold form and normally heated in an oven or microwave provided by the operator.
(i) A nonalcoholic beverage, in either powder or liquid form, whether or not carbonated, such as soda water, ginger ale, colas, root beer, flavored water, artificially carbonated water, orangeade, lemonade, juice drinks containing less than 25% by volume of natural fruit or vegetable juices, and similar drinks.
(ii) The term does not include a juice beverage.
Vending machine--A device which mechanically dispenses tangible personal property, including food and beverages, for a purchase price.
(b) Registration. An operator who sells taxable tangible personal property or selected food and beverage items through a vending machine is required to obtain a Sales, Use and Hotel Occupancy Tax License for the purpose of collecting and remitting tax to the Department. One license is sufficient for any number of machines operated by the same operator.
(c) Identification requirement. A sign or a sticker setting forth the name and address of the operator shall be conspicuously displayed on the vending machine.
(1) General. The sale of food or beverages may be taxable or exempt depending upon the type of food or beverage or upon the basis of the location from which the food or beverage is sold. Since a vending machine does not qualify as an eating establishment, only the sale of selected food and beverage items as defined in subsection (a), is taxable when sold from a vending machine. Taxable tangible personal property, other than food and beverages, is also subject to tax when sold from a vending machine.
(2) Sales of taxable property, other than food and beverages. An operator is required to collect and remit Sales Tax upon the purchase price of each individual sale of taxable property, such as cigarettes, combs, toys and similar items. The amount required to be inserted in the machine is presumed to be the purchase price of each taxable item of property unless the operator displays a sign or sticker indicating the purchase price and the amount of tax for each taxable item.
(3) Sales of selected food and beverage items.
(i) Imposition. The sale of selected food and beverage items, as defined in subsection (a), from a vending machine is subject to tax.
(ii) Collection of tax. An operator of a vending machine from which selected food and beverage items are sold is required to collect and remit Sales Tax at the rate of 6% upon the sale of the selected food and beverage items. Sales Tax shall be computed by the following formula: (Total receipts from the sale of selected food and beverage items ÷ 1.06) × .06 = Sales Tax due.
''A'' operates a vending machine from which milk, coffee and crackers are sold. ''A'' removes $100 from the machine representing the following sales: milk-$50, coffee-$25 and crackers-$25. Coffee is a selected food and beverage item. Milk and crackers are not. ''A'' remits tax in the amount of $1.42 calculated as follows: ($25 ÷ 1.06) × .06 = $1.42.
(4) Sales of food and beverages other than selected food and beverage items.
(i) The sale of food and beverages of the type described in this paragraph are not subject to sales tax when sold from a vending machine.
(ii) Examples of exempt food and beverages include.
(A) Baked goods, such as cakes, pies, cookies.
(B) Potato chips.
(C) Corn chips.
(D) Cheese balls.
(G) Milk products, such as plain milk, chocolate milk, malted milk.
(H) Ice tea and iced coffee.
(I) Juice drinks.
(J) Unflavored water.
(K) Prepackaged ice cream products, such as ice cream cakes and pies, popsicles, sundaes and novelties.
(L) Prepackaged frozen water-based products.
(M) Candy and gum.
(N) Other food and beverages not defined as a selected food and beverage item.
(e) Vending machine sales on school or church property.
(1) Sales of selected food and beverage items dispensed by means of a vending machine located on the premises of a school or church are exempt from tax, if the sales are made in the ordinary course of the activities of the school or church.
(2) Sales of tangible personal property, other than food or beverages, which are dispensed by means of a vending machine located on the premises of a school or church, are subject to tax.
(f) Remitting tax to the Department. Sales tax collected by the operator upon taxable property, including selected food and beverage items, shall be reported and remitted to the Department.
[(f)] (g) Purchase or lease of vending equipment and supplies.
[Vending] (1) The purchase or lease of vending equipment, including parts [and], accessories, [purchased for or used in connection therewith, shall be included within the scope of the definition of tangible personal property and the purchase thereof shall be] such as tables, chairs, microwaves, straw and napkin dispensers and other similar items, and supplies, such as straws, napkins, stirrers, eating utensils and similar items, is subject to tax.
(2) Wrapping supplies, such as plastic, paper and styrofoam cups, bowls or similar containers used to wrap property which is sold, are exempt from tax.
[Pa.B. Doc. No. 99-1126. Filed for public inspection July 16, 1999, 9:00 a.m.]
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