If a snack food seller uses cardboard 'honor system' boxes with a money slot, can the seller treat sales through those boxes as exempt vending machine sales for Maine sales tax purposes?

Plain-English summary

Representative Cushman Anthony asked AG James E. Tierney whether a seller who placed snack foods in cardboard "vending boxes" with a coin slot could use the vending machine exemption in 36 M.R.S.A. § 1760(34) and pay sales tax only on the wholesale purchase, rather than collecting sales tax from each customer at retail. The boxes operated on an honor system. The buyer dropped the selling price into the slot and took an item; unlike a real vending machine, the coin did not trigger any mechanism. Tierney concluded the exemption did not reach those boxes. The statute applied only to sales "through coin-operated vending machines," and the dictionary meaning of "vending machine" required a slot machine that began operation when a coin was inserted. A passive cardboard box with a money slot was not a vending machine in any plain-language sense.

The legislative history reinforced the textual answer. The vending machine exemption was created by P.L. 1973, c. 766, which replaced an earlier blanket exclusion for sales of ten cents or less. The Statement of Fact attached to L.D. 2163 (106th Legis. 1974) explained that "automatic retailers, unlike their counterparts who sell the same products manually, do not have the ability to collect the sales tax with each sale" because the machines cannot accept pennies and must price in nickel increments. The 1977 expansion (L.D. 1355) carried an essentially identical statement. The cardboard box did not suffer from those mechanical limitations; it could accept pennies. Extending the exemption to it would have made the exemption a competitive subsidy rather than a workaround for machine limitations. Tierney closed with the standard rule from Robbins v. State Tax Assessor, 536 A.2d 1127, 1128 (Me. 1988): an exemption from taxation is to be narrowly construed.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is an "honor system" vending box?

The opinion describes it as a cardboard box with a money slot, into which the buyer deposited the selling price upon taking an item. Unlike a typical vending machine, no money was required to operate the machine; the buyer simply paid by trust.

Why did the original vending machine exemption exist?

Coin-operated vending machines in the 1970s could not accept pennies and had to price in five-cent increments. A retailer who built sales tax into a machine price would be at a competitive disadvantage to a person selling the same items manually who could charge to the cent. The Legislature gave the vending operator a wholesale-tax-only option to even that out. Cardboard boxes did not have those mechanical constraints.

What does it mean to "narrowly construe" a tax exemption?

When a statute creates an exemption from a generally applicable tax, courts and AGs read the exemption to cover only what its language clearly reaches. Borderline or ambiguous cases default to the general rule (the tax applies). Robbins v. State Tax Assessor (1988) is the Maine canonical statement of that rule.

Did the opinion discuss the policy of exempting honor-system sellers?

Tierney expressly declined to take a policy position. He wrote, "this Department of course does not take any position about whether the result contained herein is desirable as a matter of policy, but is merely giving its view of the current state of the law." Changing the rule would require legislative action.

Background and statutory framework

Maine's Sales and Use Tax Law (Title 36) generally requires sellers of tangible personal property to collect tax at the point of retail sale. The vending machine exemption in § 1760(34) was a narrow carve-out for "products for internal human consumption when sold through coin-operated vending machines by a person more than 50% of whose gross receipts from the retail sale of tangible personal property are derived from sales through vending machines." Two threshold elements had to be met: the sales had to be through coin-operated vending machines, and the seller had to derive more than half of total retail receipts from such sales. The cardboard-box arrangement failed the first element regardless of the seller's overall mix. The opinion does not address what would happen if the seller mixed real vending-machine sales with cardboard-box sales, but the result is straightforward: cardboard-box sales would not count toward the exemption's denominator either.

Citations

• 36 M.R.S.A. § 1760(34) (1990) (vending machine sales tax exemption)
• P.L. 1973, ch. 766 (1973) (creating the vending machine exemption to replace earlier ten-cent-or-less exclusion)
• L.D. 2163, Statement of Fact (106th Legis. 1974) (rationale: machine mechanical limitations)
• L.D. 1355, Statement of Fact (108th Legis. 1977) (expansion of exemption)
• Robbins v. State Tax Assessor, 536 A.2d 1127, 1128 (Me. 1988) (rule that tax exemptions are narrowly construed)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1990/ag_19900221.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

90-3

JAMES E. TIERNEY
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGUSTA, MAINE 04333

February 21, 1990

Honorable Cushman Anthony
House of Representatives
State House Station #2
Augusta, ME 04333

Dear Representative Anthony:

You have asked whether a seller of snack foods from cardboard "vending boxes" must collect Maine sales tax on his sales or may, under the so-called "vending machine exemption", 36 M.R.S.A. § 1760(34), pay sales tax on his "wholesale" purchase of the food only. For the reasons which follow, it is the opinion of this Department that the exemption does not apply, and that the sales tax must be collected and paid.

As this Department understands it, the vending device in question is a cardboard box with a money slot into which the purchaser, on the "honor system", deposits the selling price upon taking one of the items for sale. Unlike a typical vending machine, it is not necessary for money to be placed in the box to operate the machine.

The vending machine exemption provides specifically that:

[N]o tax on sales, storage or use shall be collected upon or in connection with ... [s]ales of products for internal human consumption when sold through coin-operated vending machines by a person more than 50% of whose gross receipts from the retail sale of tangible personal property are derived from sales through vending machines. [emphasis added]

36 M.R.S.A. § 1760(34).

The term "coin-operated vending machine" is not defined in the Sales and Use Tax Law, and, therefore, the scope of the exemption must be determined by the plain meaning of the language used. Webster's Seventh New Collegiate Dictionary defines "vending machine" as "a slot machine for vending merchandise". "Slot machine", in turn, is defined as "a machine whose operation is begun by dropping a coin into a slot". The most relevant definition of "machine" is "an assemblage of parts that transmit forces, motion and energy one to another in a predetermined manner". Based upon these dictionary definitions, it is clear that the vending box is not a "coin-operated vending machine".

In addition, the legislative intent in enacting the vending machine exemption does not support its extension to the selling arrangement at issue. In 1973, an exclusion from sales tax of all sales for 10 cents or less by persons primarily engaged in making such sales was repealed. In its place, an exemption was created for vending machine sales of 15 cents or less by persons who derived more than 50% of their gross receipts from such sales. P.L. 1973, c. 766. The rationale for the exemption was explained as follows:

Automatic retailers, unlike their counterparts who sell the same products manually, do not have the ability to collect the sales tax with each sale as is required by law. This is due to mechanical limitations inherent in the equipment in that the machine cannot accept pennies and pricing must, therefore, be made at minimum increments of a nickel ....

L.D. 2163, Statement of Fact (106th Legis. 1974). The extension of the exemption to all vending machine sales in 1977 contained an essentially identical statement of fact. L.D. 1355, Statement of Fact (108th Legis. 1977).

The slots in the cardboard vending boxes, unlike those in coin-operated vending machines, do not control any mechanical function relating to the dispensing of the food and are capable of accepting pennies, if necessary, in payment of sales tax. Therefore, the legislative intent of the exemption for sales made through coin-operated vending machines, to account for mechanical limitations in the machines without requiring the seller to charge an incrementally higher price (rounded to the next higher 5 cents) which arguably would place him at a competitive disadvantage relative to "manual sellers", does not appear to comprehend extension of the exemption to the cardboard vending boxes.

In summary, because the cardboard vending boxes neither fall within the plain meaning of "coin-operated vending machine" nor appear to be within the legislative intent of the vending machine exemption, this Department concludes that the seller of snack food by means of those boxes must collect Maine sales tax upon his selling price to his customers. This result is compatible with the rule of statutory construction that an exemption from taxation is to be narrowly construed. See Robbins v. State Tax Assessor, 536 A.2d 1127, 1128 (Me. 1988).

In providing this opinion, this Department of course does not take any position about whether the result contained herein is desirable as a matter of policy, but is merely giving its view of the current state of the law. Please feel free to reinquire if any further clarification is needed.

JAMES E. TIERNEY
Attorney General

JET:SW

cc: John LaFaver