Vending machine owners ask city to reconsider tax on food

Alden Savoca, owner of Vendors Tech, repairs vending machines similar to the test machines behind him at his office at 2800 Printers Way. Savoca is part of a group that is asking the Grand Junction City Council to stop charging sales tax on food purchased from vending machines.



QUICKREAD

CITY DEFINES CANDY

To bring its tax code in line with the state of Colorado’s, City Council proposed an ordinance that exempts food from sales tax on items sold by vending machines. Soft drinks and candy, however, will not be defined as food and will continue to be taxed.

Under the new ordinance:

■ Candy means a preparation of sugar, honey or other ... sweeteners in combination with chocolate, fruit or nuts or ... other ingredients ... shall not include any preparations containing flour.

■ Soft drinks means non-alcoholic beverages .... that contain sweeteners. Soft drinks do not include drinks that contain milk ... soy, rice .. or greater than 50 percent of vegetable or fruit juice by volume.



Grand Junction, Mesa County and the state of Colorado tax candy and soda sold by vending machines.

The city also taxes all other food sold from vending machines, but that local law is about to change.

Under existing ordinances, all food purchased from a vending machine in Grand Junction is taxed at 2.75 percent. The same food sold at grocery stores and convenience stores is not taxed.

The discrepancy concerned Alden Savoca and a group of six other vending machine owners, who wrote a letter in January to Mayor Sam Susuras and asked the City Council to take action.

“Our original request for the vending food sales tax to be repealed included a request for the tax on soda and candy to be done away with,” Savoca wrote.

But Savoca asked all taxes on food sold by vending machines be repealed, a proposal city staff projected would cause a $50,000 drop in city revenue.

Savoca said it was unfair to require vending machine operators to withhold tax for food when grocery and convenience stores are not required to do so.

The city exempts from tax the sale of food when it is considered for home consumption. To qualify, the law must judge the item to be food, a City Council report said.

City ordinances state food sold from vending machines is for immediate consumption, not home consumption, and therefore subject to tax, according to the report.

Both Colorado and Mesa County also exempt food for home consumption. Food from vending machines is specifically exempted by the state and county, but candy and soda are not.

Candy and soda are not considered food under state and county law, Savoca said.

In response to Savoca’s concerns, the council proposed a new ordinance, which got a first reading Wednesday.

The ordinance would repeal the city’s sales tax on food from vending machines, aligning the city with state and county laws on the subject.

The repeal would cost the city about $15,000 a year, but save vending machine owners an equal amount.

“It’s a nickel-and-dime business,” Savoca said.

Vendors lose accounts every day because competitors can sell their product for five cents less, he said.

“There is very little margin in vending and businesses don’t like price increases,” Savoca said.

Savoca’s business is primarily focused on maintaining machines, though he previously operated a route.

“Vendors will always grow their businesses or hire additional employees when extra revenue is available and that is exactly what would happen if sales taxes on their food sales were dropped,” he said.

The price on vended items probably won’t be adjusted down as a result of the repeal, Savoca said.

Vending machines were the first automated retailers. They showed up in the U.S. for the first time on the elevated subway platforms in New York City in 1888 and sold Tutti-Frutti gum, according to gumballmachine.com.

In Grand Junction today, at least six independent entrepreneurs operate vending machine routes in and around the city.

They spread out from the city in routes of 40 machines or more situated at truck stops, restaurant bathrooms, break rooms, factory work rooms, and anywhere else people with small change need candy bars and soda pop.


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