Sales Tax Confusion and the Tech Scene

Recently, the "Bodega" app emerged onto the tech scene, and given the nature of this convenience store-like kiosk, much attention is being given to how (and whether) to go about charging sales tax on transactions initiated from the app. 

The app allows users to locate a nearby "Bodega station," and users can then enter a store code and purchase items like food and drinks and even personal care items. The problem is that these vending machine-like stations will potentially have different sales tax obligations, depending on how they are classified in a given state.

California, for example, charges a partial tax for certain foods when sold by vending machine (which would otherwise not have a sales tax when sold by a grocer). However, should the Bodega stations be considered stores, and not vending machines, no sales tax would apply.

Conversely, New York imposes tax on sales of tangible property by vending machine if the sale exceeds $0.10. However, there is no tax for items purchased via a coin-operated bulk-vending machine selling personal property for $0.50 or less.

The whole this is a logistical nightmare when it comes to sales tax, but determining whether the Bodega stations are considered vending machines or retail stores is the logical first step, followed by looking to streamline sales tax initiatives across state boundaries where possible. And, should this type of business model catch on, we can expect further tax confusion when it comes to apps in the future.