Ramsey County District Court File No. C3021129
Considered and decided by Toussaint, Chief Judge, Harten, Judge, and
The application of the Minnesota sales tax to all sales of food by vending machines, but not to food sales in limited settings by other retailers, does not violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution or the Uniformity Clause of the Minnesota Constitution.
The opinion of the court was delivered by: Minge, Judge
Appellant trade association of vending-machine operators and appellant vending-machine operator sought a declaratory judgment that the application of the Minnesota sales tax to all sales of food in vending machines under Minn. Stat. §§ 297A.61, subds. 3(d)(4), 31-34,.67, subd. 2 (Supp. 2001) violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and the Uniformity Clause of the Minnesota Constitution. The district court granted summary judgment against appellants. Because there is a rational basis for the application of the sales tax to vending-machine sales of food items, and because the distinction between vending-machine sales and sales that may otherwise be exempt is not arbitrary and capricious, we affirm.
In 2001, the Minnesota legislature amended the statutes governing taxation of food sales. 2001 Minn. Laws 1st Spec. Sess. ch. 5, art. 12, §§ 8 (amending Minn. § 297A.61, subd. 3 (2000)), 27-30 (adding Minn. Stat. § 297A.61, subds. 31-34), 36 (amending Minn. Stat. § 297A.67, subd. 2 (Supp. 2000)). The amendments were passed as part of the legislature's adoption of the Uniform Sales and Use Tax Administration Act proposed by the Multi-State Streamlined Sales Tax Project. 2001 Minn. Laws 1st Spec. Sess. ch. 5, art. 12, § 84 (codified as Minn. Stat. § 297A.995 (Supp. 2001)). The purpose of the streamlined Sales and Use Tax Agreement is to "simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance." Minn. Stat. § 297A.995, subd. 3. This agreement provides for uniform rules and definitions, access to a simplified electronic registration system for member states, and uniform sourcing rules for taxable transactions. Minn. Stat. § 297A.995 (Supp. 2001). Despite these changes, the existing Minnesota law that all vending-machine food sales are subject to sales tax was not changed.
The Minnesota Automatic Merchandising Council (MAMC), a nonprofit membership organization that includes corporations, partnerships, and individuals operating vending machines, and one of its members, MSY Enterprises, Inc. d/b/a Apple Automatic Food Service (Apple), brought a declaratory judgment action challenging the continuing application of a sales tax to food sales through vending machines. Apple operates and maintains 550 vending machines in Minnesota in office buildings, manufacturing plants, shopping centers, and car dealerships. Two of the machines are located near employee lunchrooms. Apple's machines contain a variety of food products, including prepackaged sandwiches, bottled water, cookies, various types of chips, popcorn, soups, and boxed entrees such as lasagna.
MAMC and Apple moved for summary judgment, asking the court to find that the amended statutes are unconstitutional under both the United States and Minnesota Constitutions. The defendants in the action (the Commissioner of Revenue, Minnesota Department of Revenue, and the State of Minnesota) also requested summary judgment dismissing the action.
The disputed changes in the Minnesota sales tax law involve shifting the definition of exempt food sales while maintaining a tax on all food sold through vending machines. The prior sales tax law taxed food "sold by the retailer for immediate consumption on the retailer's premises." Minn. Stat. § 297A.61, subd. 3(d)(1) (2000). The tax also had been applied to food "prepared by the retailer for immediate consumption either on or off the retailer's premises." Id., subd. 3(d)(2) (2000). This covered essentially all sales of food at restaurants, delis, coffee shops, concession stands, and lunch vehicle sales, as well as prepared food sold at convenience stores. The emphasis was on imposing the tax if either the nature of the food product being sold, the place of consumption, or the portion size was covered by the statute. Without exception, under the old law, all vending-machine sales of food were taxed. Id., subd. 3(d)(7) (2000).
Except for vending-machine sales, the new statute uses a functional approach in determining what food sales are exempt from the sales tax. All vending-machine sales of food are taxed. Minn. Stat. § 297A.61, subd. 3 (d)(4) (2002). For other retailers, food that is taxed is limited to soft drinks, candy, *fn1 and prepared food. Minn. Stat. § 297A.61, subd. 3(d) (2002). The statute defines "prepared food" as:
(1) * * * food * * * sold with eating utensils provided by the seller, including plates, knives, forks, spoons, ...