Multi-State – Bodega App May Vend Up Sales And Use Tax Confusion

Boomberg BNA
Sales Tax Slice
by Stephanie E. Cangialosi
September 21, 2017

Last week, the Bodega app burst onto the tech scene garnering a lot of attention over its name, in particular. Naming controversies aside, now that Bodega is in the spotlight it’s time to talk sales tax.

If you haven’t already heard, Bodega enables users to locate a desired “bodega station,” and, using a store code, access nonperishable food, drinks, sundries, and personal care items, among other things. The user is then charged for the item on a credit card which is linked to the app. Since these stations began popping up in San Francisco, they have also been referred to as vending machinespantry boxes, and “convenience store-like kiosks.” Ultimately, these store/vending machine-like hybrids could potentially have different sales tax collection obligations depending on how they are classified from one state to the next.

For example, in California, a retailer’s gross receipts derived from the sales of vending-machine food are generally taxable, but some foods are only partially taxed when sold in this manner. Foods subject to a partial tax when sold by vending machine, such as candy, chips, juice and hot coffee, are not otherwise taxable if sold by a grocery store.[1]

Let’s now assume that Bodega stations in California are treated like stores. In this case, the retailer would not be taxed on sales of candy, juice, chips and other items because, as previously stated, these items are not taxable when sold by a grocery store.

It is worth noting that California’s statute does not expressly address the sale of tangible personal property in this manner. But, items such as grooming products, which are likely to be made available at bodega stations, are generally subject to a retail sales tax rather than a gross receipts tax (gross receipts tax is normally imposed against the revenue collected by the seller and not the price paid by the consumer). If California treats Bodega stations in the same manner that it would vending machines, the state may also require the station owners to bear the burden of paying a gross receipts tax on such sales as well.

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