Vending Machine Food Sales (Publication 118)
Applying and Reporting Tax

Applying tax to vending machine food sales

Tax generally applies to the sale of food in vending machines (see Exceptions, below). However, certain sales of food items from vending machines are only partially taxable.

Partially taxable food sales. In a store, the sale of cold food items and individual hot drinks to go is generally exempt from sales tax. For example, tax does not apply when a grocery store sells candy, chips, fruit juice, and cups of hot coffee to go. However, the sale of those same items through a vending machine is partially taxable. Tax applies to 33 percent of your gross receipts from vending machine sales of cold food products (including noncarbonated water) and hot drinks.

Exceptions: There are two exceptions. Tax does not apply to:

1. Bulk sales of candy and other food items in a coin-operated vending machine for 25 cents or less, and
2. Sales of purified drinking water dispensed into a customer's container when the water enters the vending machine through local supply lines.

Fully taxable sales. All carbonated beverages and hot food products (other than hot beverages) sold through vending machines are fully taxable, just as they would be in a store or at a restaurant. If you sell products other than food in vending machines, those sales are generally taxable.

Please note: You must keep adequate and complete records. Be sure to keep separate records of your partially taxable and fully taxable sales.

Properly reporting tax on your sales

We presume that the sales price of items you sell in a vending machine includes an amount for sales tax reimbursement. When you complete your sales and use tax return, you must deduct that tax from your gross sales. Otherwise, you will pay too much sales tax with your return (see Sales Tax Factors).