Judge Rules Massachusetts Vending Machine Fee Is Lawful After Industry Disputes

Posted On: 6/23/2016

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TAGS: vending machine fee, Massachusetts vending machine tax, FDA calorie-disclosure, Massachusetts Automatic Merchandising Council, Foley Food & Vending Co., Judge Robert, Massachusetts Department of Public Health

State lawmakers say upcoming FDA calorie-disclosure and nutritional compliance inspections will justify fee

BOSTON -- A judge on June1 ruled that the annual $10 per vending machine licensing fee that operators are required to pay in Massachusetts will remain in effect, despite opposition and a lawsuit by a vending company and trade association.

The Massachusetts Automatic Merchandising Council and Foley Food & Vending Co. (Norwood) filed a civil complaint seeking a declaratory judgment that the $10 fee, which was raised from $3 and approved in 2014, is not a valid fee, but rather an unlawful tax.

In his June 1 summary judgment, Superior Court Judge Robert Ullmann agreed with the vending stakeholders' position that the state's collection of fees that were not used for machine inspections but reverted to the general fund would become, at some point, an unlawful tax. However, he concluded that the collection and reversion in this case was "...not so pervasive in length of time or scope as to convert the fees into a tax."

At the summary judgment hearing on May 10, the judge's inquiries focused on the point at which revenue raised by a charge so exceeds any legitimate costs that it is an unlawful tax. Court decisions have made it clear that there can be incidental amounts collected over the amount of costs, but they have not quantified at what point the amount is no longer incidental.

The state's Attorney General conceded at the hearing that Massachusetts's Department of Public Health has not made inspections since at least 2010 and, therefore, did not incur costs, but that the DPH anticipates conducting inspections. The plaintiffs argued that fees cannot be collected for "anticipated" costs.

The DPH cited federal nutritional and calorie-disclosure guidelines set forth in the 2010 School Nutrition Act and the Patient Protection and Affordable Care Act that imposed new mandates for vending machines, which prompted the agency to review its licensing program.

As part of this review, the DPH and Department of Finance proposed increasing the annual vending machine licensing fee from $3 per machine to $20 per machine to cover the anticipated cost of hiring of additional inspectors, food safety experts and administrative staff to ensure compliance with the new regulations.

However, after holding a public hearing, meeting with vending industry representatives and receiving hundreds of written comments, the agencies decided that fee should be increased to $10 per machine, and that they would hire fewer employees to oversee the inspections. The $10 fee was approved in June 2014 and went into effect in August of that year. DPH began collecting the fees in October 2014.

In 2010, DPH collected $87,090 in vending machine license fees, all of which was deposited into the state's general fund, and in 2012, it collected $72,378, also reverted to the general fund.

According to DPH, the departure of a vending machine licensee operating 8,000 of the estimated 27,000 venders in the state, followed by a state hiring freeze, led to delays in implementing its new licensing program. Additionally, the FDA postponed until December 2016 the date for compliance with calorie-disclosure on vending machines.

However, in 2013, according to the summary judgment, DPH collected $88,695 in machine licensing fees, and used half of it to hire an administrative assistant whose duties included the vending machine licensing program, with the rest reverting to the general fund. In 2014, DPH collected $60,539 in vending machine licensing fees, most of which was used to pay administrative staff involved with the licensing program.

As of earlier this year, according to the summary judgment, DPH was funding a licensing supervisor and a food and drug inspector who has been developing and field-testing a new program for tracking and monitoring vending machine licensee compliance with regulatory mandates.

Foley and MAVA have not yet said whether they will appeal the decision, in which case a three-judge panel would decide the case without regard to Judge Ullmann's decision.