Many entrepreneurs see a vending machine business as a relatively hands-off business opportunity that requires little more than an initial investment and then small amounts of routine machine maintenance. Even if the return on their investment is small, a vending machine operator is still a business owner and must abide by all local and state regulations that apply to operating a business, including receiving a vendor’s license and other licensing requirements.
Vending Machine Licensing
Some municipalities require vending machine operators to obtain a license for their machines as if they were a traditional vendor with a continual presence at his business. While most states don’t regulate licensing for vending machines – and many local governments don’t regulate vending machines – business owners need to research their local ordinances to determine if they must register for a vendor’s license. Consult your town’s department of revenue or business licensing division to determine local regulations.
Considerations for Licensure
In some areas, licensing regulations for vending machines may vary depending upon business variables. Many areas allow business owners to place vending machines in their establishments without requiring they obtain a vendor’s license, using the business’ existing structure as an umbrella licensing agreement to cover in-store vending machines. Most areas only require the operator of a vending machine business to receive a single vendor’s license, rather than licensing the machines individually. Other areas allow vending machines that raise money for nonprofit organizations – churches, parent-teacher organizations or youth organizations – to operate unlicensed.
Penalties for Unlicensed Vendors
Municipalities enforce different penalties for vendors who operate without a license. In most cases, first-time offenders face a fine. Although the amount of these fines varies between locations, they can be a major setback to part-time vending machine operators. Because of their limited ability to generate income, a small fine of $100 may constitute several months’ profits for a small vending machine operator.
Sales Tax License
Regardless of local ordinances rules on vendor’s licenses for vending machine operators, a vending machine owner may need to state pay sales taxes on items sold through his machines, and thus needs a sales tax license. Sales tax law varies between states, although many states exempt small sales – usually less than 10 or 15 cents from sales tax. Taxes on food and beverage sales may be figured at a different rate than sales of other tangible goods, such as toys. When reporting sales tax, the amount collected from customers includes the tax and cost of the sale. For example, when sales tax on food is 2 percent, a 50-cent soda sold through a vending machine should be reported as a sale of 48 cents and 2 cents tax.