Canteen Corp. v. State Board of Equalization

The California State Board of Equalization (Board) appeals from a judgment against it in favor of respondent Canteen Corporation (Canteen) awarding the latter a tax refund of $354,000.11 after a court trial on stipulated facts.

Facts

During the period May 1, 1969, through December 31, 1975, Canteen was engaged in the business of dispensing food and beverages from vending machines it owned and operated. Some of its vending machines dispensed paper cups with hot or cold beverages selling from 15 cents or less, and for 10 cents or less during the period prior to January 1, 1970.

Canteen bought paper cups from independent paper goods companies and beverage ingredients from independent vendors selling such beverage ingredients in its machines. Customers would then buy the drinks by putting the purchase price of the beverage in the machines and making the selection, at which point the machine would dispense the beverage into the paper cup. The customers paid neither a separate charge nor a deposit on the paper cups, and of course, did not return the cups after their intended single use. Canteen’s sole use of the cups was to hold the drinks dispensed by the machines.

Canteen…