How is Texas sales tax reported on coin-operated bulk vending machines that dispense toys, stickers, candy, or soft drinks, and is there an exemption for cheap toys sold this way?

Plain-English summary

Someone with a vending machine business asked the Comptroller about the sales tax reporting rules for coin-operated bulk vending machines. The Comptroller first defined the term: a bulk vending machine is a coin-operated device that holds unsorted items and randomly dispenses goods in approximately equal amounts, with no ability for the customer to select a particular item or type of item (think a gumball-style machine dispensing a random toy, sticker, or piece of candy).

The tax treatment then splits by product type:

• Toys (or similar items designed primarily to be used or played with by children) sold through a qualifying bulk vending machine for a total price of 50 cents or less are exempt from sales tax, effective July 1, 1999.
• Soft drinks and candy sold through a machine that does NOT qualify as bulk vending must have tax reported on all gross receipts from those sales.
• All other food (besides soft drinks and candy) sold through vending machines is reported on 50% of total gross receipts from food sales.

What this means for you

Bulk vending machine operators (toy/sticker/gumball-style machines)

If your machine randomly dispenses toys or similar children's items for 50 cents or less per play, those sales are exempt from Texas sales tax — no tax reporting needed on that specific revenue stream.

Vending machine operators selling candy, soft drinks, or other food

Know which reporting bucket applies: candy and soft drinks from a non-bulk-vending machine are taxed on 100% of gross receipts, while other vended food is taxed on only 50% of gross receipts — a meaningful difference in your tax base depending on what you're selling and how the machine operates.

Accountants and tax professionals

This letter is a compact three-part reference for vending machine sales tax reporting: the bulk-vending toy exemption (50 cents or less, effective 7/1/1999), the full-receipts rule for candy/soft drinks outside that exemption, and the 50%-of-receipts rule for other vended food.

Common questions

Q: Are toys sold through a gumball-style vending machine taxable in Texas?
A: Not if the machine qualifies as a bulk vending machine (random, unsorted dispensing with no item selection) and the total price is 50 cents or less — those toy sales are exempt, effective July 1, 1999.

Q: How do I report tax on candy or soft drinks sold through vending machines?
A: If the machine doesn't qualify as bulk vending, report tax on all gross receipts from those sales.

Q: What about other vended food, like snacks that aren't candy?
A: Report tax on 50% of the total gross receipts from those food sales.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200006380L

Original ruling text

June 6, 2000

From: Bettie Peterson

To: **

Subject: resale tax question

Thank you for your recent email.

A bulk vending machine is a coin-operated device that contains unsorted items
and randomly dispenses goods in approximately equal amounts without selection
of a particular item or type of item by the customer.

Toys or other items designed primarily to be used or to be played with by
children and sold through a coin-operated bulk vending machine for a total
consideration of 50 cents or less are exempt from sales tax. This was effective
July 1, 1999.

Vendors of soft drinks and candy not qualifying as bulk vending sales should
report tax on all receipts. With the exception of soft drinks and candy,
vending machine operators must report tax on 50% of the total gross receipts
from sales of all food.

Referenced rules are available at
.

The State Tax Automated Research system, that provides viewing and downloading
of rules, edited letter rulings, hearings, AG Opinions, etc., may be accessed
on the Internet at: http://www.window.state.tx.us/

This opinion is based on the facts you submitted and current law. Other facts
though similar, may result in different answers.

If you have questions or need more information, I will be glad to help you. You
may call me toll free from anywhere in the United States at 1-800-531-5441,
extension 5-0330.