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Indiana Vending Company Wins Partial Victory In Sales Tax Case

Posted On: 7/1/2016

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TAGS: vending, RDM Sales and Service, RDM vs. Indiana Department of Revenue, Indiana Tax Court, vended bottled water tax, vending operator tax liability

INDIANAPOLIS -- RDM Sales and Service scored a partial victory against the Department of Revenue in the Indiana Tax Court on June 23. At issue was whether all of RDM's vending machine and cafeteria sales are subject to sales tax and negligence penalties.

RDM Sales and Service, based in Ferdinand, IN, reportedly sold food through vending machines and operated two cafeterias at business locations owned by third parties. The DOR claimed that, following an audit, RDM did not report all vending machine and cafeteria food sales subject to sales tax during the 2006-08 tax years. It issued proposed assessments of tax, interest and penalties to RDM. The vending company filed a protest and the department denied it in 2009. RDM then filed a tax appeal in 2010. In 2013, DOR filed a motion for summary judgment.

On June 23, the court granted summary judgment on DOR's claim that bottled water and fruit juice sold at regular price from vending machines is subject to sales tax. However, RDM won a partial victory when the court ruled that bottled water and fruit juice dispensed from vending machines for free or at a discounted rate to exempt customers was not subject to sales tax.

The court also ruled that food sold by RDM for immediate consumption was subject to sales tax even though the foodservice provider only operated the cafeterias where the food was served and didn't own them. The court also ruled that the DOR could impose penalties on RDM for not paying sales tax because the vending company "relied unreasonably" on a 2004 tax clarification without fully investigating the rule.

The court, however, did not rule on whether cut or repackaged food, pasteurized food requiring cooking or bakery items sold without utensils were subject to sales tax. A separate trial regarding RDM's tax liability for these items will be held at a later date.

See the full ruling here.