Were vending-machine food, soft drinks, and candy sold inside a hospital or similar institution exempt in Texas?

Plain-English summary

A company proposed vending-machine service at an institution, but its incomplete contract was inconsistent about whether the company sold products to the institution or operated as a full-service vendor selling to final consumers. The Comptroller did not resolve who made the sales without a completed agreement.

If the company sold to the institution for resale, the institution could give it a properly completed resale certificate.

Food and food products, including soft drinks and candy, served to students, residents, patients, or inmates of qualifying hospitals, prisons, day-care centers, summer camps, nursing homes, and similar licensed institutions were exempt.

Food sold to visitors or employees was taxable. Vending machines in hallways, cafeterias, waiting rooms, or other public areas made taxable sales even when located inside a qualifying institution.

What this means for you

Institutional location alone did not create exemption. The seller, actual consumer, and whether the machine served a public area all mattered.

Common questions

Did the submitted contract identify the seller? No.

Could an institution buy vending products for resale? Yes, with a valid resale certificate.

Were food and soft drinks served to patients or residents exempt? Yes under the cited rule.

Were visitor and employee sales exempt? No.

Were machines in public hallways taxable? Yes.

Citations and references

• 34 Tex. Admin. Code Rule 3.293(c)(2)(A) (institutional 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/9010L1066F10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller October 1, 1990

Dear ***:

Thank you for your recent letter regarding the taxability of items
sold through vending machines.

You stated in your letter that your company plans to install vend-
ing machines at the *** at ** *,
****, Texas.

Item #1 on the form contract which you submitted with your letter
indicates the vended items are sold to the Veterans Administra-
tion. However, other language in the form contract indicates
COMPANY A is a full service vendor (i.e. a vending machine owner
who places a machine at the location of another person, without
charge, keeps the machine stocked, removes the money from the ma-
chine and pays the location owner either a flat fee or commission
on what is sold). A full service vendor is the seller of the
vended items to the final consumer.

The uncompleted document which you submitted with your letter does
not make it clear who is making the sales.

If COMPANY A is selling to the ** for resale, the ***
will provide a properly completed resale certificate to you in
lieu of the tax.

Food and food products (including soft drinks and candy) served to
students, residents, patients, or inmates of hospitals, prisons,
day-care centers, summer camps, nursing homes and other institu-
tions licensed by the state for the care of human beings are exempt
from sales tax. See Section (c)(2)(A) of enclosed Rule 3.293.

Food sold to visitors or employees are taxable. For this reason,
sales from vending machines located in hallways, cafeterias, waiting
rooms or other locations commonly open to the public are taxable
even though the machine is located in one of these institutions.

This opinion is based on the facts presented. If there are addition-
al or different facts, the opinion may change.

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 5-0330. The regular
number is 512/463-4600, or write me at Tax Correspondence.

Sincerely,
Bettie U. Peterson
Tax Correspondence Division