Does Utah sales tax apply to the federal excise tax portion of cigarette prices sold from vending machines?

Plain-English summary

A cigarette vending machine operator asked whether it needed to post a sign on each machine breaking out the cigarette price, the $1.00 federal excise tax, the sales tax amount, and the total, in order to keep the federal excise tax out of the Utah sales tax base.

The Commission's answer: the federal excise tax doesn't need a posted sign to stay excluded from sales tax — what matters is that it's separately stated in the operator's own accounting records, not that it's physically displayed on each machine. Citing an unspecified Utah Supreme Court decision and Rule R865-19-52S, the Commission confirmed that a separately stated federal excise tax is not subject to Utah sales tax, and that this holds as long as the operator consistently keeps its accounting records showing the sale price separate from the federal excise tax.

What this means for you

Vending machine operators and other retailers selling excise-taxed goods

You don't need a physical breakdown sign on every machine or point of sale to exclude a separately stated federal excise tax from your Utah sales tax base — consistent internal accounting separating the two amounts is what the Commission looks for.

Accountants and tax professionals

This is a narrow, mechanics-focused ruling confirming that "separately stated" for excise-tax exclusion purposes can be satisfied through consistent bookkeeping rather than point-of-sale signage — useful for any retailer selling goods carrying a federal excise tax through unattended/vending channels where per-unit signage isn't practical.

Common questions

Q: Do I need a sign on each vending machine breaking out the federal excise tax?
A: No — what matters is that your accounting records consistently separate the sale price from the federal excise tax.

Q: Is the federal excise tax itself subject to Utah sales tax?
A: Not when it's separately stated (in records, not necessarily on a sign) from the sale price.

Q: Can I rely on this 1992 ruling today?
A: Not directly — it binds the Commission only for the taxpayer and facts it addressed, and Utah's rules have been renumbered and amended repeatedly since. Verify current law before relying on it.

Citations and references

Rules:

• Utah Admin. Rule R865-19-52S (separately stated federal excise tax excluded from the sales tax base)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/92-041.htm

Original ruling text

Response
October 29, 1992

Letter

October
29, 1992

XXXXX

Re:
Advisory Opinion - Excise Tax on Cigarettes

Dear
XXXXX:

Your
request for an advisory opinion that your client be permitted to post a sign on
cigarette vending machines showing a breakdown of the sale price of the
cigarettes, the $1.00 Federal excise tax, the amount of the sales tax and the
total vended amount was referred to the Auditing Division for their analysis.

It
is the division staff recommendation that:

1.
Based upon the decision of the Utah Supreme Court in the XXXXX case, and Rule
R865-19-52S separately stated Federal excise tax is not subject to sales tax.
It is not necessary that a sign be posted on each vending machine, providing
accounting records reflect the sale price separate from the Federal excise tax.
If this is consistently done, sales tax is not due on the excise tax.

Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously, if there are deviations from these
facts, this opinion may be negated.

If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are
attached.

To
arrange for Americans with Disabilities Act accommodations, please contact the
Tax Commission at (801) 530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing
three working days notice.

For
the Commission,

Joe
B. Pacheco

Commissioner

Joe
B. Pacheco, Commissioner

Utah
State Tax Commission

160
East Third South

Salt
Lake City, Utah 84134

Dear
Mr. Pacheco;

A
client of mine sells cigarettes through vending machines. At the present time there is $1.00 per pack
federal excise tax. One of the following
statements is posted on the vending machines:

Vendor
Name

Sales
Invoice

Established
Sales Price $$$$$

Fed
Excise tax $$$$$

Sales
Tax $$$$$

Total
Amount $$$$$

This
is representative and if the total price is different, the taxable amount and
the sales tax amount will be adjusted.

or

Vendor
Name

Sales
Invoice

Established
Sales Price equals the TOTAL AMOUNT less federal excise tax of $1.00 and applicable sales tax.

For
example:

Established
Sales Price $$$$$

Fed
Excise Tax $$$$$

Sales
Tax $$$$$

Total
Amount $$$$$

Please
advise me by XXXXX if this procedure is not correct.

Respectfully,

XXXXX