Tax Type
Retail Sales and Use Tax
Description
Military Exchange vending machine sales
Topic
Taxability of Persons and Transactions
Date Issued
10-31-1984
October 31, 1984
Re: Request for Ruling: Sales and Use Tax
Military Exchange Vending Machine Sales of Soft Drinks
Dear ****
This will reply to your request for a ruling on the applicability of the sales and use tax to military exchange vending machine sales of soft drinks and references our meetings of May 23 and October 3, 1984.
Facts
In a typical contractual arrangement, private soft drink vendors contract with military exchanges to provide soft drink vending machines and the products to be vended through these machines. Pursuant to a standard contract, the military exchange purchases the initial product inventory, determines the product pricing and prescribes the specifications of the vending machines. The contract specifies that the initial product inventory and subsequent products, once placed in the vending machines, are the property of the military exchange which is also at risk for any product loss or damage. The soft drink vendor removes the proceeds from the machines and turns them over to the exchange, which then reimburses the vendor for replacement product.
Ruling
Virginia Code § 58-441.2(b) defines a "sale" for purposes of the sales and use tax as "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property." Virginia Code § 58-441.3(c) defines a "retail sale" as "a sale to a consumer or to any person for any purpose other than for resale.... In the case at hand, there is no question that the contractual agreement provides for a sale of soft drinks through vending machines. However, with respect to the transaction between the soft drink vendor and the military exchange we must hold that no "retail sale" occurs.
The definition of "retail sale" specifically excludes a sale for resale. Based upon the contractual provisions, title to and control over the product being vended passes from the vendor to the exchange prior to the retail sale of the product to the ultimate consumer. Therefore, the sale of the product from the vendor to the exchange constitutes a sale for resale, a transaction which is statutorily excluded from the tax. The potentially taxable event occurs at the point the product is sold through the vending machine to the consumer. If the exchange is a government entity, it need remit no sales tax on these vending machine sales. If the exchange is operated by a private concessionaire, sales through the machines will be subject to the tax, notwithstanding the fact that such machines are located on a federal installation.
If we can answer any additional questions, please let us know
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner