Tax Type
Retail Sales and Use Tax
Description
Vending Machines Sales
Topic
Accounting Periods and Methods
Rate of Tax
Date Issued
07-07-1982
July 7,1982
Re: Sales and Use Tax/Vending Machine Sales
Dear ******************
This letter will reply to your June 14, 1982 correspondence regarding the computation of the sales tax on sales made through vending machines located in Virginia. You request a ruling on the acceptability of your alternative method for computing the tax.
FACTS
*********** places and operates over 500 vending machines in Virginia. The cost of goods sold through such machines cannot be determined by machine or by locality, but only in the aggregate for all goods sold in Virginia. You propose to apply a cost of goods percentage to all goods sold through vending machines in Virginia to arrive at the base for computing the sales tax.
DETERMINATION
§ 58-441.34 of the Code of Virginia provides that the sales tax shall apply, at the rate of five percent, to wholesale purchases for : sale through vending machines. In interpreting this section, the department has held that where persons placing vending machines also manufacture the property being sold through such machines, the term "wholesale purchases" shall be construed to mean the cost of the tangible personal property manufactured. (See Sales and Use Tax Policy Statement 82-1, § B(2).)
Virginia Code § 58-441.34 also allows the Commissioner to authorize dealers who are unable to maintain satisfactory records for the computation of the cost of wholesale purchases or the cost of tangible personal property manufactured to compute the tax via an alternative method at a tax rate of four percent. This alternative requires that total gross receipts be divided by 1.04 to determine the tax base and that this base be multiplied by .04 to determine the tax due. We have determined that this alternative computation method will be available for persons placing and selling items through vending machines, provided they are unable to determine the cost of the property sold (or manufactured).
Inasmuch as we have recognized the difficulty some dealers may have in determining a cost figure and have provided an alternative method for computing the sales tax, we cannot authorize any additional computational variations. To do so would increase the costs associated with administering this exemption.
Therefore, in the instant case, I cannot agree to a tax base computation in the manner which you set forth. The facts which you have presented are sufficient to allow you to use the alternative method of computation based upon a tax rate of four percent upon a tax base of gross receipts. Should you wish to utilize this reporting method, please advise me, and I will issue the appropriate authorization. Otherwise, you must report the five percent tax on wholesale purchases or the manufactured cost of the Property sold through vending machines.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner