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The Treatment and Use of Vending Machine Income

Basis for the Acquisition of Vending Machine Income Under the Act …

 

When it enacted the Randolph-Sheppard Act, 20 U. S. C. §§107-107f., Congress intended that the provision of income from vending machines on Federal property to blind vending facility programs in the States would supplant or eliminate the payment of set-aside by blind vendors, thus increasing blind vendors’ incomes in those States that imposed set-aside levies, and providing additional income for the operation of vending facility programs in all States.

 

The Act defines vending machine income as: Receipts (other than those of a blind licensee) from vending machine operations on Federal property after cost of goods sold (including reasonable service and maintenance costs), where the machines are operated, serviced, or maintained by, or with the approval of, a department, agency, or instrumentality of the United States, or commissions paid (other than to a blind licensee) by a commercial vending concern which operates, services, and maintains vending machines on Federal property for, or with the approval of, a department, agency, or instrumentality of the United States. Congress found that vending machines not operated by or for blind vendors “constitute[d] a major threat both to the livelihood of individual licensees and to the growth of the program as a whole.” Senate Report 93-937 (93d Cong., 2d Sess. June 17, 1974

 

Section 107d-3 of the Randolph-Sheppard Act, and the counterpart section of its implementing regulations, 34 C. F. R. §395.32, set forth the requirements for the provision by Federal departments, agencies, and instrumentalities of income from vending machines on Federal property. All income from vending machines on Federal property in direct competition with a blind vending facility must be turned over to the State-licensing agency for distribution to the affected blind vendor.

 

Subject to certain exceptions, State licensing agencies are entitled to fifty percent of all income from vending machines on Federal property that are not in direct competition with a blind vending facility. It is the Federal property managing agency’s responsibility to determine whether a vending machine is in direct competition with a blind vendor, but if that determination is contested, the State licensing agency may bring an arbitration complaint against the Federal agency.

 

Limitations on the State Licensing Agency’s Right to Vending Machine Income
It was the original expectation of the Senate Committee on Labor and Public Welfare, which under Senator Jennings Randolph initiated the Randolph-Sheppard Act Amendments of 1974, that all income from vending machines on Federal property would be required to be paid to State licensing agencies (SLAs) operating blind vending facility programs under the Act. Following intensive lobbying by labor unions affiliated with the United States Postal Service, however, it was decided to limit somewhat the acquisition of vending income.

 

The Committee also decided to carve out other limitations. Under the Act, 100 percent of all vending machine income from machines in direct competition with a blind vendor must be paid to that vendor, up to a ceiling amount representing the larger of the average blind vendor’s income in the particular State, or the average blind vendor’s income nationally. This limitation does not apply to income from vending machines operated by the blind vendor. Any direct competition income over the ceiling goes to the State-licensing agency for specific program purposes. Likewise, where there is no blind vendor on Federal property, fifty percent of all income goes to the SLA. The remainder may be used by the Federal property-managing agency for its employee recreation or morale and welfare fund.

 

Where the majority of a Federal agency’s working hours occurs outside the normal workday, the income sharing with the SLA is thirty percent. There are other limitations in the Act and regulations on the acquisition of vending income. If the vending income generated on an individual Federal location, installation, or facility does not exceed $3,000 annually, the Federal agency is not required to share income on that location, installation, or facility.

 

With respect to military exchanges, such as post and base exchanges and ships’ stores, income from vending machines within retail sales outlets under the control of those exchanges does not have to be shared. Likewise, income from vending machines operated by the Veterans Canteen Service does not have to be shared with the SLA These limitations can be overridden by agreement between the SLA and the Federal agency, so that blind licensees receive a greater percentage or amount of income than the law provides.

 

Setting Aside of Vending Machine Income
The Act specifies the uses that can be made of income from vending machines on Federal property. The priority use for such income is for retirement or pension plans, health insurance, sick leave and vacation pay for blind vendors. The blind vendors in a State vote on whether to use the vending income for these purposes. Any income remaining after its use for retirement and fringe benefits must be used only for four specific purposes:

(1) maintenance and replacement of equipment,

(2) purchase of new equipment,

(3) management services, and

(4) assuring a fair minimum return to blind vendors.

 

When Federal vending machine income is used for these four purposes, the Act requires that “any assessment charged to blind licensees by a State licensing agency shall be reduced pro rata in an amount equal to the total of such remaining vending machine income.”20 U. S. C. §107d-3(c). In other words, set-aside levies against the net proceeds of blind vendors must be reduced by the amount representing the percentage paid by each blind vendor to the program for the four specific purposes.

 

The SLA, with full and active participation by the State Committee of Blind Vendors in the decision-making process, may establish a set-aside fund that is comprised of Federal vending machine income and the levy against the net proceeds of vending facilities. Any levy on net proceeds applies to vending facilities operated on Federal and other property, whether State, county, city, or private locations, and all are to be placed in the set-aside fund and used for the limited number of purposes described above.

 

The Role of the State Committee of Blind Vendors
The Committee of Blind Vendors in each State has joint decision-making authority with the State-licensing agency in planning, program development, and management and administration. Among the responsibilities of the Committee are the determination of set-aside levels, and the amount to be expended for each set-aside purpose. The State-licensing agency is required to “maintain adequate records to support the reasonableness of the charge for each [set-aside] purpose including any reserves necessary to assure that such purposes can be achieved on a consistent basis.”34 C. F. R. §395.9. This requirement is not only for program audit purposes, but to enable the State Committee of Blind Vendors to have information on which to base a determination of the appropriate level of the levy against the blind vendors’ net proceeds. Thus, budget and planning decisions derived from income from vending machines on Federal property and any levy on the net proceeds of blind vendors, which comprise the State’s set-aside fund, must be made with the full, active participation of the State Committee of Blind Vendors.

 

Federal Matching Under the Rehabilitation Act
Set-aside funds expended for certain program purposes are eligible for Federal matching funds under the Rehabilitation Act of 1973, as amended. The eligible expenditures from set-aside include acquisition of vending facility equipment, including replacement; and management services and supervision.

 

“Management services” includes all expenditures made to improve the operation of vending facilities, servicing and initial costs of establishing and maintaining vending facilities for a period not to exceed six months. The term also means (by RSA policy issuance) exploration of new locations and the development of these locations, and SLA activities related to the selection and operation of the State Committee of Blind Vendors.

 

Expenditures from set-aside funds not eligible for Federal matching funds include maintenance of equipment, guaranteeing a fair minimum return to vendors, and the establishment and maintenance of retirement funds and fringe benefits.

 

The Kennelly Amendment and Highway Rest Stop Vending
In 1982 Congress enacted an amendment to the Surface Transportation Act, 23 U. S. C. §111(b), that established a priority for blind vendors under the Randolph-Sheppard Act in the operation of vending machines at rest stops on the Interstate Highway System. Frequently, blind vendors operate such machines as their vending facilities. Machines that are not on Federal property (as is usually the case) are not considered machines subject to the Act’s set-aside requirements.

 

Dated:August 23, 2002
Robert R. Humphreys, Esq.
4319 Reno Road, N. W.
Washington, D. C. 20008
(202) 363-2200