Indiana ~ Sales and Use Tax: Taxability of Food Sold in Vending Machines and Cafeterias Discussed

CCH Tax Day Report

The Indiana Tax Court affirmed a corporation’s liability for sales tax on vending machine sales of bottled water and fruit juice and on heated food and food sold for immediate consumption in cafeterias. While sales of bottled water and fruit juice are generally exempt from tax, all sales from vending machines are taxable regardless of the type of item. However, transactions in which the corporation provided bottled water and fruit juice free of charge or at a discounted rate to exempt customers are not taxable. The court noted that the taxation of all vending machine sales, but not all grocery/convenience store sales, does not violate either Indiana’s Equal Privileges and Immunities Clause or the federal Equal Protection Clause.

Heated cafeteria food sold for immediate consumption was taxable. Cafeteria food sold for immediate consumption was taxable, even though the cafeteria was not owned by the corporation, because the cafeteria was the corporation’s place of business. Sales of food ordinarily sold for immediate consumption at or near the premises of the seller are taxable. The court found that the question of whether the corporation’s sales of combined food ingredients were taxable must be resolved at trial since it was not shown whether items were sold after being merely cut, repackages, or pasteurizes ingredients, or were raw animal foods requiring cooking. The court also found that the question of whether the corporation or the cafeteria owners provided eating utensils with bakery items must be resolved at trial.

RDM Sales and Service, Inc. v. Department of Revenue, Indiana Tax Court, No. 82T10-1001-TA-00003, June 23, 2016, ¶402-408

Other References:

Explanations at ¶60-390

Explanations at ¶60-760

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