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    Vending Machine Operators Lose Sales Tax Battle

    Minnesota owners can't compete with c-stores because of unfair fees.

    MINNEAPOLIS -- Minnesota's vending machine operators, hoping to change the state's sales tax collection policies, were dealt a harsh blow Tuesday by the Minnesota Court of Appeals who ruled they must pay taxes to the state on items sold at the machines.

    Vending machine operators sued the Minnesota Department of Revenue last year alleging that laws requiring their businesses to collect sales tax while granting exemptions to others are unconstitutional, according to the Star (Minn.) Tribune. A district court earlier this year ruled for the state.

    "The same bag of chips, bottle of water or cookie that we sell through vending machines is taxed, but if it's sold at a convenience store or lunch counter, it's not. That's not a level playing field," said Mark Young, president of Apple Automatic Food Service, a St. Louis Park-based vending machine company with 19 employees.

    Vending machine operators, the report said, have to pass along 6.5 cents to the state for every bottle of water they sell for $1. Convenience stores do not. "It's tough for us," Young said. "We're a struggling industry going through consolidation."

    The lawsuit was filed by the Minnesota Automatic Merchandising Council (MAMC), an Eden Prairie, Minn.-based trade group, and St. Louis Park-based MSY Enterprises Inc., which operates under the Apple Automatic Food Service name. The vending machine trade group has tried unsuccessfully for years to change the sales tax law, but boosted efforts in the face of new tax laws that took effect in 2002.

    The district court also ruled that tax exemptions for grocery-type foods in eating establishments is consistent with the state's intent to avoid taxing food necessities, and that imposing a sales tax on all food sold through vending machines is constitutional.

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