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VAMA Details Impact Of Revised State Sales And Use Tax On Vending

Posted On: 3/7/2013

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TAGS: Virginia Automatic Merchandising Association, Virginia vending machine tax, vending operator, Virginia's revised sales and use tax, Gov. Bob O'Donnell, SB 1355, HB 2313

RICHMOND, VA -- The Virginia Automatic Merchandising Association has described the effect on vending operators of the state's revised sales and use tax requirements.

The tax law was changed to address funding requirements for a new transportation initiative launched by Gov. Bob O'Donnell. The implementation of the plan was detailed in companion bills introduced in the Commonwealth's Senate (SB 1355) and House of Delegates (HB 2313). The Senate did not pass its bill; the House did, and it was approved by a House-Senate conference and signed by the governor.

The measure increases the state sales and use tax rate from the present 4% to 4.3% through a 0.3% increase in the tangible personal property tax. With the 1% local rate, this brings the total to 5.3%.

"We managed to keep the vending section (58.1-614) out of the Senate version, but not completely out of the House version," VAMA reported. "In the end we lost, as the Senate caved in to House insistence to keep vending in the bill."

The transportation conferees included Delegates David B. Albo (R-42nd District), S. Chris Jones (R-76th District), John M. O'Bannon III (R-73rd District), Beverly J. Sherwood (R.-29th District) and Onzlee Ware (D-11th District), and Sens. Janet D. Howell D.-(32nd District), Thomas K. Norment, Jr. (R-3rd. District), Walter A. Stosch (R- 12th District), John C. Watkins (R-10th District) and Frank W. Wagner (R-7th District).

VAMA explained that Virginia law imposes the retail sales and use tax at a reduced rate for certain "foods purchased for human consumption," which include most staple grocery items and packaged cold prepared foods, but not alcoholic beverages or prepared hot foods sold for immediate consumption. The tax on "food purchased for human consumption" is levied at a total rate of 2.5%, which includes 1.5% state sales tax and 1% local tax.

Although House Bill 2313 imposes an additional 0.3% tax on the sale of tangible personal property, the increase will not apply for "food purchased for human consumption," VAMA noted. However, a bulletin issued by the Department of Taxation in 2005 stated that a number of vendors are presumed "sellers of food for immediate consumption" and so do not qualify for the reduced tax rate on their sales of food -- even if such foods would otherwise be eligible for the reduction. These presumed sellers include vending machine operators as well as caterers, concession vendors, entertainment facilities, fair and carnival vendors, gift shops, hamburger and hot dog stands, honor snack vendors, ice cream stands and trucks, mobile food vendors, movie theaters and newsstands.

Because these vendors are presumed sellers of food for immediate consumption which does not qualify for the reduced rate, they will be required to collect a total state and local sales and use tax of 5.3% on their food sales when the measure takes effect on July 1, VAMA emphasized.

Virginia law provides that when a dealer makes sales of tangible personal property through vending machines (or in any other manner that makes collection of the tax impractical, as determined by the Tax Commissioner), that dealer must report his wholesale purchases of items for sale at retail through vending machines, and must remit a total tax of 6% of such wholesale purchases (5% state, 1% local). "Vending machine sales are taxed one percentage point higher than other sales because the tax is imposed on the vendor's purchases, rather than sales," VAMA explained. Thus, when House Bill 2313 takes effect, dealers making sales through vending machines will have to remit an amount equal to 6.3% of their wholesale purchases.

VAMA reported that legislators will return to Richmond on April 3 to reconvene for one day and address any bills that the governor has sent back with amendments, or has vetoed. Only the amendments will be debatable during this session.

"We had met with the governor's staff on several occasions expressing our opposition to being added to the sales tax increase, but in the end were not successful," VAMA executive director Beth Bowen informed the association's membership. "We will keep you posted on further developments." Among other things, she said, the provision may not be constitutional; a similar measure was challenged successfully on constitutional grounds in 2007.

"Taxes should remain a priority item on VAMA's legislative list," Bowen emphasized. She urged members to visit the VAMA website at for additional details.