If a delicatessen sells frozen pizzas and made-to-order sandwiches wholesale to bars for resale to their patrons, does it have to charge sales tax on those wholesale sales?

Plain-English summary

Jo Ann Narducci runs D & V Foods, a retail delicatessen that also prepares food and sells it wholesale to local bars, which then resell it to their own patrons and collect tax on those retail sales. Two of the products at issue were uncooked frozen personal-size pizzas and made-to-order hero sandwiches (cold cut, eggplant, and meatball).

New York generally exempts food sold unheated, in the same form and packaging commonly used by ordinary food stores, when it's meant for off-premises consumption. The uncooked frozen pizzas fit that description — they're the kind of item a typical food store sells unheated and unprepared — so D & V's wholesale sales of the pizzas to bars are not subject to sales tax.

Sandwiches get special, stricter treatment: New York's regulations specifically carve out sandwiches from the general food-store exemption and tax them "in all instances," including sales made for resale. So D & V's hero sandwiches are taxable when it sells them to the bars, even though the bars will resell them and collect their own tax on the retail sale. To avoid double taxation, the regulations let the bar take a credit, on its own sales tax return, for the tax it already paid to D & V on the wholesale purchase, up to the amount actually paid.

What this means for you

Delis, wholesale food suppliers, and commissary kitchens

Not all food you sell wholesale for resale gets the usual resale exclusion. Sandwiches are singled out by regulation as taxable in every instance, so you must charge tax on wholesale sandwich sales just as you would on a retail sale — the "for resale" status doesn't exempt them. Other unheated food commonly sold by ordinary food stores (like frozen pizzas) generally isn't taxed at the wholesale (or retail) level in the same circumstances.

Bars, restaurants, and other resellers of prepared food

If you buy sandwiches wholesale and pay tax on that purchase, remember to claim the credit for that already-paid tax against the tax you collect and remit on your own retail resale — otherwise you risk paying (or your business risks absorbing) the tax twice on the same sandwich.

Accountants and tax professionals

The key mechanic is 20 NYCRR § 527.8(i): normally a purchase "for resale" is tax-free until the item is actually resold, but sandwiches are a carved-out exception that gets taxed at the wholesale sale regardless, with a credit mechanism (not an exemption) softening the effect at the retail level. Watch for this same sandwich-specific carve-out whenever a client's wholesale food business involves sandwiches.

Common questions

Q: Is all unheated wholesale food exempt from New York sales tax?
A: No — it depends on the specific item. Food commonly sold unheated by ordinary food stores (like frozen pizzas) is generally exempt, but sandwiches are specifically taxed in all instances by regulation, including wholesale sales for resale.

Q: If my sandwich supplier already charged me sales tax, do I have to pay tax again when I resell the sandwich to my customer?
A: You still collect and remit tax on your retail sale, but you can take a credit on your sales tax return for the tax you already paid on the wholesale purchase, limited to the amount you actually paid.

Q: Can another delicatessen or wholesale food business rely on this ruling?
A: No. This advisory opinion binds the Department only for Jo Ann Narducci/D & V Foods on the facts described. Confirm how your own products are packaged, prepared, and sold before assuming the same tax treatment.

Citations and references

Statutes and regulations:

• Tax Law § 1105(d)(i) (tax on food and drink sold by restaurants, taverns, and similar establishments)
• 20 NYCRR § 527.8(a) (imposition)
• 20 NYCRR § 527.8(e) (consumption off premises; heated/unheated food store form, condition, and packaging)
• 20 NYCRR § 527.8(i) (resale of food or drink; tax credit mechanism)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2001.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a01_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-01(18)S
Sales Tax
May 24, 2001

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S000822A

On August 22, 2000, the Department of Taxation and Finance received a Petition
for Advisory Opinion from Jo Ann Narducci, d/b/a D & V Foods, 1051 Main St., Holbrook, NY
11741-1618. Petitioner, Jo Ann Narducci, d/b/a D & V Foods, submitted additional informational
by telephone on October 10, 2000.
The issue raised by Petitioner is whether food sold through its retail establishment to local
bars, for resale to their patrons, is subject to sales tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner operates a retail delicatessen business. Petitioner purchases food that it prepares
and sells to bars on a wholesale basis. The bars sell the food to the public on a retail basis and
collect tax on such sales from their customers. The food sold by the Petitioner consists of items such
as uncooked frozen personal size pizzas and cold cut, eggplant and meatball hero sandwiches.
Applicable Law and Regulations
Section 1105(d)(i) of the Tax Law provides for the imposition of sales tax, in part, on:
The receipts from every sale of beer, wine or other alcoholic beverage or any
other drink of any nature, or of food alone, when sold in or by restaurants, taverns or
other establishments in this state, or by caterers, including in the amount of such
receipts any cover, minimum, entertainment or other charge made to patrons or
customers (except those receipts taxed pursuant to subdivision (f) of this section):
(1) in all instances where the sale is for consumption on the premises where
sold;
(2) in those instances where the vendor or any person whose services are
arranged for by the vendor, after the delivery of the food or drink by or on behalf of
the vendor for consumption off the premises of the vendor, serves or assists in
serving, cooks, heats or provides other services with respect to the food or drink; and
(3) in those instances where the sale is made through a vending machine that
is activated by use of coin, currency, credit card or debit card (except the sale of
drinks in a heated state made through such a vending machine) or is for consumption

-2­
TSB-A-01(18)S
Sales Tax
May 24, 2001

off the premises of the vendor, except where food (other than sandwiches) or drink
or both are (A) sold in an unheated state and, (B) are of a type commonly sold for
consumption off the premises and in the same form and condition, quantities and
packaging, in establishments which are food stores other than those principally
engaged in selling foods prepared and ready to be eaten.
Section 527.8 of the Sales and Use Tax Regulations provides, in part:
(a) Imposition. Sales tax is imposed on the receipts, including any cover,
minimum, entertainment or other charge, from every sale of beer, wine or other
alcoholic beverages and food or drink of any nature sold in or by restaurants, taverns
or other establishments in this State or by caterers:
(1) in all instances where the sale is for consumption on the premises where
sold;
(2) in those instances where the sale is for consumption off the premises and
the vendor (or someone acting on behalf of the vendor) after delivery either serves
or assists in serving, cooks, heats or provides services with respect to the food or
drink; and
(3) in those instances where the sale is for consumption off the premises of
the vendor all sandwiches and other food or drink unless the food or drink is sold in:
(i) an unheated state; and
(ii) the same form and condition, quantities and packaging commonly used
by food stores not principally engaged in selling foods prepared and ready to be
eaten.
*

*

*

(e) Consumption off premises. The phrase for consumption off the premises
shall mean that the food, including sandwiches, or drink is intended to be consumed
at a place away from the vendor's premises.
(1) Food or drink in a heated or unheated state. The determination of when
food or drink is sold either in a heated or unheated state must be made according to
the vendor's method of merchandising.

-3­
TSB-A-01(18)S
Sales Tax
May 24, 2001

(i) If the vendor attempts to maintain the food at a temperature which is
warmer than the surrounding air temperature by using heating lamps, warming trays,
ovens or similar units, or cooks to order, the vendor is selling food in a heated state.
(ii) If the vendor sells prepared foods from units maintained at or below
surrounding air temperature, such sales are sales of prepared food in an unheated
state.
*

*

*

(2) Form, condition, quantity and packaging sold in food stores.
(i) The term food stores shall mean any establishment which is principally
engaged in selling food or drink which is not prepared and ready to be eaten.
Supermarkets, grocery stores, fish markets, produce markets, bakeries and meat
markets are examples of the types of establishments considered to be food stores.
When a department within food stores makes sales of food or drink which are subject
to tax, it must collect the tax.
(ii) Food sold in an unheated state is taxable when sold as sandwiches or
meals ready to be eaten when arranged on plates or platters as individual or multiple
servings regardless of how the sales price is arrived at (pound v. serving).
(iii) Food sold in an unheated state is not subject to tax when commonly sold
in food stores in bulk by weight by the dozen (or part thereof) or by volume (gallon,
quart, etc.) for off-premises consumption.
(iv) Sales of heated and unheated food in combination on plates or as dinners
are subject to tax on the total charge.
*
Example 5:

*

*

Sandwiches sold through vending
machines or other establishments are
taxable in all instances.
*

*

*

(i) Resale. (1) Any person purchasing food or drink for resale as such is
required to pay tax thereon at the time of purchase.

-4­
TSB-A-01(18)S
Sales Tax
May 24, 2001

(2) When the food or drink is subsequently resold, the seller is required to
collect tax from the purchaser.
(3) The tax paid by the seller may be taken as a credit against the tax which
the seller is required to collect and remit on the subsequent sale. The credit is limited
to the amount of tax actually paid on the purchase by the seller of the food and drink
resold.
Opinion
The food sold by the Petitioner to bars consists of items such as uncooked frozen personal
size pizzas and cold cut, eggplant and meatball hero sandwiches. Pursuant to Section 1105(d)(i) of
the Tax Law, food sold in an unheated state and of a type commonly sold for consumption off the
premises and in the same form and condition, quantities, and packaging by food stores, is not subject
to sales tax. The uncooked frozen personal size pizzas sold by Petitioner would constitute a type of
food commonly sold by a food store. Therefore, the sale by Petitioner of the uncooked frozen pizzas
will not be subject to sales tax. However, Section 1105(d)(i) of the Tax Law provides for the
imposition of sales tax on the sale of sandwiches in all instances, including sales for resale. See
Section 527.8(i) of the Sales and Use Tax Regulations. Accordingly, Petitioner’s sales of cold cut,
eggplant and meatball hero sandwiches will be subject to sales tax.
It is noted that the sales tax paid by a bar on the purchase of the sandwiches may be taken as
a credit on its return when it remits the tax collected on the subsequent sale of the sandwiches.
See Section 527.8(i) of the Sales and Use Tax Regulations.

DATED: May 24, 2001

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist III
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.