Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 445.0010

445.0010 Coin Operated Copy Machine. A taxpayer sells photocopies through coin operated machines. It contracts with owners of stores, libraries, and other locations to install the machines in places accessible to the public. The contracts typically provide that the taxpayer will pay the location owners a percentage of the receipts from the machines. There is no contract between the taxpayer and the location owner regarding the per copy price. The per copy price is initially set by the taxpayer at a per copy price it deems appropriate. However, contracts do include a provision allowing price changes. Contracts include the following paragraph:

"Vendor (taxpayer) reserves the right to reasonably raise or lower the vend price for coin copies . . . . in accordance with prevailing economic conditions."

The taxpayer did not raise the per copy price even though there was a tax increase. Price increases in vending machines are made in at least one nickel increments, since machines requiring payment in odd penny amounts are not practical.

In this case, the taxpayer's contracts do not qualify for the fixed price exemptions under Revenue and Taxation Code sections 7261 and 6376.1. The contracts may have obligated the taxpayer to pay a fixed percentage to the location owners as rent, but they did not obligate the claimant to furnish the copies for a fixed price as required by the statute. The typical contract authorized the taxpayer to raise prices in accordance with "prevailing economic conditions," and a tax increase would justify a price rise under this language. The fact that the taxpayer was unwilling to raise prices because one penny increases would be impractical and a nickel decision increase would deter the customer was purely a business decision and was not required by the contracts. 3/2/94.