Does selling candy and snacks from open, unlocked vending trays for 75 cents or less qualify for New York's coin-operated vending machine sales tax exemption?

Plain-English summary

A. C. P. Services Corp. markets candy and snacks through an "open vending service" — it gets permission from business establishments to place open trays of candy and snacks on the premises, customers simply take what they want, and pay by depositing money in a nearby coin box. There's no locked machine dispensing the item in exchange for coins; it's an honor-system tray setup.

New York exempts candy, soft drinks, and similar items normally excluded from the food exemption when they're sold for 75 cents or less "through any vending machine activated by the use of coin, currency, credit card or debit card." The Department applied the settled rule that tax exemptions (unlike the taxing statute itself) are construed strictly against the taxpayer, and held that an open tray with a nearby coin box simply isn't a "vending machine" — there's no mechanism activated by inserting payment to dispense the item. Since A. C. P.'s open trays don't meet that threshold requirement, its candy and snack sales don't qualify for the 75-cents-or-less vending machine exemption, regardless of the item's low price.

What this means for you

Vending and snack-tray operators

The exemption for low-priced candy/snack sales specifically requires a coin-, currency-, or card-activated machine — an honor-system open tray with a nearby payment box, however similar in practical effect, doesn't qualify. If you want the exemption, you need an actual activated vending machine, not just a low-cost, low-friction sales method.

Accountants and tax professionals

This is a clean, narrow application of the strict-construction-of-exemptions doctrine (Matter of Aldrich v Murphy; Matter of Airlift International) — even though the underlying policy goal (making small transactions administratively simple) arguably applies just as well to open trays, the statute's specific "vending machine activated by coin, currency, credit card or debit card" language is read literally and narrowly.

Common questions

Q: Are open vending trays taxed the same as coin-operated vending machines for cheap candy sales?
A: No — the 75-cents-or-less exemption specifically requires a coin/currency/card-activated vending machine, which an open tray with a nearby coin box is not.

Q: Does the low price of the items matter here?
A: No — the exemption's threshold requirement is the type of dispensing mechanism (an activated vending machine), not just the item's price.

Q: Why are tax exemptions read this narrowly?
A: New York courts apply a settled rule that ambiguity in a tax exemption (as opposed to the taxing statute itself) is resolved against the taxpayer and in favor of taxation.

Q: Can another open-tray vending business rely on this ruling?
A: No. This opinion binds the Department only for this petitioner's specific facts, though the "not a vending machine" conclusion reflects a straightforward reading of the statute likely to apply to similar honor-system setups.

Citations and references

Statutes and case law:

• Tax Law § 1115(a)(1) (vending machine exemption, 75 cents or less)
• Matter of Nehi Bottling Co. v Gallman, 39 A.D.2d 256
• Matter of American Locker Co. v Gallman, 38 A.D.2d 105
• Matter of Aldrich v Murphy, 42 A.D.2d 385
• Matter of Airlift International, Inc. v State Tax Commission, 52 A.D.2d 688

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2002.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a02_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-02(1)S
Sales Tax
April 3, 2002

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S001228A

On December 28, 2000, the Department of Taxation and Finance received a Petition for
Advisory Opinion from A. C. P. Services Corp., 800 Rt 245, Middlesex, New York 14507.
The issue raised by Petitioner, A. C. P. Services Corp., is whether a business that operates
an open vending service is considered to be a vending machine operator under Section 1115(a)(1)
of the Tax Law and therefore exempt from collecting sales tax on certain items sold for 75 cents or
less.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner markets candy and snacks through an open vending service. The candy and snacks
are made available to customers in open vending trays. Petitioner receives permission from business
establishments to place its trays on the business’ premises. Petitioner stocks the trays with candy
and snacks for sale to customers. Customers deposit payment for the candy and snacks in a coin box
located near the tray.
Applicable Law
Section 1115 of the Tax Law provides, in part:
(a) Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
(1) Food, food products, beverages, dietary foods and health supplements,
sold for human consumption but not including (i) candy and confectionery, (ii) fruit
drinks which contain less than seventy percent of natural fruit juice, (iii) soft drinks,
sodas and beverages such as are ordinarily dispensed at soda fountains or in
connection therewith (other than coffee, tea and cocoa) and (iv) beer, wine or other
alcoholic beverages, all of which shall be subject to the retail sales and compensating
use taxes, whether or not the item is sold in liquid form. The food and drink
excluded from the exemption provided by this paragraph under subparagraphs (i),
(ii) and (iii) of this paragraph shall be exempt under this paragraph when sold for
seventy-five cents or less through any vending machine activated by the use of coin,
currency, credit card or debit card. With the exception of the provision in this
paragraph providing for an exemption for certain food or drink sold for seventy-five

-2­
TSB-A-02(1)S
Sales Tax
April 3, 2002

cents or less through vending machines, nothing herein shall be construed as
exempting food or drink from the tax imposed under subdivision (d) of section
eleven hundred five. (Emphasis supplied)
Opinion
Petitioner is in the business of marketing candy and snacks through an open vending service.
The candy and snacks are made available for sale to customers in open vending trays. The trays are
not coin activated machines. Customers simply take candy and snacks from a tray and deposit
payment in the coin box. "In construing a taxing statute in order to determine what is included
within its purview the rule is that the statute is to be strictly construed in favor of the taxpayer and
against the taxing authority (Matter of Nehi Bottling Co. v Gallman, 39 AD2d 256, affd 34 NY2d808;
Matter of American Locker Co. v Gallman, 38 AD 2d 105, affd 32 NY2d 175). In construing a
taxing statute in order to determine the scope of a statutorily prescribed exemption, however, the
rule is that the exemptions are to be strictly construed and that if any ambiguity or uncertainty exists
it is to be resolved in favor of the sovereign and against exemption (Matter of Aldrich v Murphy,
42 AD2d 385)." See Matter of Airlift International, Inc, v State Tax Commission 52 AD2d 688.
The open vending trays used by Petitioner are not a vending machine for purposes of Section
1115(a)(1) of the Tax Law. Consequently, Petitioner’s sales of candy and snacks from open vending
trays are not eligible for the exemption under Section 1115(a)(1) for sales of food or drink at
seventy-five cents or less through a vending machine.

DATED: April 3, 2002

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.