Is a box of frozen, individually wrapped, fully cooked chicken sandwiches sold at a warehouse club subject to New York sales tax as a taxable 'sandwich,' or exempt as grocery food?

Plain-English summary

Costco sells a box of 12 individually wrapped, fully cooked, frozen chicken sandwiches (charbroiled chicken breast on an enriched bun) in the frozen-foods section of its warehouse stores, right alongside frozen chicken potpies and similar items. Costco doesn't prepare or alter the product in any way — it's received frozen from an outside vendor and displayed as-is. The packaging says "keep frozen or refrigerated," and there's no way for a customer to eat it on the spot since Costco doesn't provide any way to thaw or heat it in the store.

New York generally exempts food sold for human consumption, but carves an exception back into taxability for restaurant-style food, including a special rule that taxes "sandwiches" sold for off-premises consumption even when a general grocery exemption for unheated, off-premises food would otherwise apply. The Department found that special sandwich rule was written to catch ready-to-eat sandwiches — the kind you could unwrap and eat right away — not a frozen product that has to be defrosted or cooked before anyone could possibly eat it. Because Costco's frozen sandwiches are sold in the same form, condition, quantity, and packaging you'd find in an ordinary grocery store's freezer case, and can't be consumed in that frozen state, they qualify for New York's ordinary grocery food exemption and are exempt from sales tax.

What this means for you

Grocery and warehouse-club retailers selling frozen "ready-to-heat" foods

New York's tax on "sandwiches" sold for off-premises consumption targets truly ready-to-eat products, not frozen items requiring the customer to thaw or cook them at home. A frozen sandwich, burrito, or similar item sold the same way a grocery store would sell it — frozen, boxed, no on-site heating available — stays exempt as ordinary grocery food, even though a warm, ready-to-eat version of the same product would be taxable.

Retailers unsure whether a "sandwich"-labeled product is taxable

Look at whether a customer could actually eat the item as sold. If it needs to be defrosted, cooked, or otherwise prepared before it's edible, and it's packaged and sold like ordinary grocery-store food rather than a prepared meal, the sandwich-specific taxability carve-out likely doesn't apply.

Businesses selling both hot/ready-to-eat and frozen versions of similar food

Don't assume a blanket rule for a category of food (like "sandwiches") applies uniformly — the same basic product can be taxable when sold hot and ready to eat, but exempt when sold frozen in grocery-store form and condition. Track how each version is prepared, packaged, and sold.

Common questions

Q: Are all sandwiches taxable in New York, even at a grocery store?
A: Generally, yes, New York's rule taxes sandwiches sold for off-premises consumption even where a general unheated-food grocery exemption would otherwise apply — but this ruling clarifies that rule doesn't reach a genuinely frozen sandwich that can't be eaten without thawing or cooking, when sold in ordinary grocery-store form.

Q: Does it matter that Costco is a warehouse club rather than a traditional supermarket?
A: No — what matters is that the product is sold in the same form, condition, quantity, and packaging as at an ordinary food store, and that no on-site facilities exist to prepare it for immediate eating, not the type of retailer.

Q: If Costco later added a way to heat the sandwiches in-store, would the answer change?
A: This ruling is limited to the facts presented (no heating facilities, sold frozen); a retailer offering on-site heating or otherwise selling a ready-to-eat version would need its own analysis, since that changes the "consumption on premises" and "ready to eat" facts this opinion relied on.

Q: Can another retailer selling a similar frozen sandwich product rely directly on this ruling?
A: No — this is a fact-specific advisory opinion binding only as to Costco's exact product and facts; another retailer's product and packaging need their own review, though the same reasoning (frozen, unheated, grocery-store form) would likely apply to genuinely comparable facts.

Citations and references

Statutes and rules:

• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1105(d)(i) (restaurant/caterer food and drink tax; off-premises sandwich exception)
• Tax Law § 1115(a)(1) (food/beverage exemption)
• 20 NYCRR 527.8(a), (e) (restaurant tax imposition; off-premises consumption and food-store definitions)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_12s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-05(12)S
Sales Tax
April 27, 2005

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030912C

On September 12, 2003, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Costco Wholesale Corporation, 999 Lake Drive, Issaquah, WA 98027.
The issue raised by Petitioner, Costco Wholesale Corporation, is whether the sale of a
box of 12 frozen chicken sandwiches is subject to State and local sales taxes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner operates a chain of cash and carry membership warehouses in 36 states and has
14 locations in New York State. Petitioner’s operations are based on the concept that offering
very low prices on a limited selection of national brand products, over a wide range of
merchandise categories, will produce rapid inventory turnover and high sales volume. Petitioner
sells a variety of merchandise, including food, candy, tobacco, sundries, appliances, electronics,
tools, office supplies, and other items. Petitioner services both retail and wholesale markets from
its selling locations, which are referred to as “warehouses.” Almost all of Petitioner’s sales are
cash and carry with the purchaser taking possession of the merchandise in the store at
Petitioner’s cash registers.
One of the products currently sold by Petitioner is a box of 12 individually wrapped, fully
cooked, frozen chicken sandwiches. The sandwich consists of an enriched bun and a charbroiled
chicken breast patty. Each sandwich is then placed in a sealed plastic bag. The sandwiches are
contained within a box with plastic wrap enclosing the box. The box of sandwiches is received
in a frozen state and sold in the frozen foods section of Petitioner’s store.
The packaging states “keep frozen or refrigerated.” This item is sold in the same freezer
case as chicken potpies and other frozen foods. Petitioner does not prepare, produce,
manufacture, or assemble this item in any way. This item is purchased from an unrelated
company. The item is not altered in any fashion. Pallets of the product, as received from
Petitioner’s vendor, are displayed in the freezer case for sale. A purchaser would be unable to
consume the item on premises even if he or she wanted to since there are no facilities provided to
defrost or reheat the item.
Applicable law and regulations
Section 1105(a) of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby imposed
and there shall be paid a tax . . . upon:

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(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
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 from every sale of food and 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;
*

*

*

(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 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 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales imposed
under subdivision (a) of section eleven hundred five and the compensating use tax
imposed under section eleven hundred ten:
(1) Food, food products, beverages, dietary foods and health supplements, sold for
human consumption but not including (i) candy and confectionery, (ii) fruit drinks which
contain less than seventy percent of natural fruit juice, (iii) soft drinks, sodas and
beverages such as are ordinarily dispensed at soda fountains or in connection therewith
(other than coffee, tea and cocoa) and (iv) beer, wine or other alcoholic beverages, all of
which shall be subject to the retail sales and compensating use taxes, whether or not the
item is sold in liquid form. The food and drink excluded from the exemption provided by
this paragraph under subparagraphs (i), (ii) and (iii) of this paragraph shall be exempt
under this paragraph when sold for seventy-five cents or less through any vending
machine activated by the use of coin, currency, credit card or debit card. With the
exception of the provision in this paragraph providing for an exemption for certain food
or drink sold for seventy-five cents or less through vending machines, nothing herein

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shall be construed as exempting food or drink from the tax imposed under subdivision (d)
of section eleven hundred five.
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:
*

*

*

(3) in those instances where the sale is for consumption off the premises of the
vendor all sandwiches and other food or drink . . . .
*

*

*

(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.
*

*

*

(2)(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).
Opinion
Petitioner sells a variety of merchandise, including food. One of the food products
Petitioner sells is a box which contains 12 frozen, fully cooked, individually wrapped, chicken
sandwiches.
Section 1115(a)(1) of the Tax Law provides an exemption for retail sales of food and
beverages sold for human consumption. However, the exemption provided in section 1115(a)
does not apply to sales of food and drink in or by restaurants, taverns and other establishments

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Sales Tax
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subject to the tax imposed by section 1105(d) of the Tax Law. The tax imposed by section
1105(d) on sales of food and drink in restaurants, taverns and other establishments applies to all
sales for on premises consumption. Section 1105(d)(i)(3) also provides that sales by restaurants,
taverns and other establishments of food, other than sandwiches, or drink in an unheated state,
for off-premises consumption, are not subject to tax where they are of a type commonly sold for
off premises consumption and in the same form and condition, quantities and packaging as in
establishments which are food stores.
The box of individually wrapped frozen chicken sandwiches sold by Petitioner is not
subject to the tax imposed under section 1105(d) of the Tax Law. This frozen food product is
not sold for on premises consumption as it clearly cannot be consumed on Petitioner’s premises
in its frozen condition and there are no facilities, such as microwave ovens, to prepare such food
for ready consumption on Petitioner’s premises. The language in section 1105(d)(i)(3)
respecting sandwiches was intended to ensure that the sale of sandwiches which are ready to be
eaten would be subject to tax under section 1105(d). This language was not intended to tax
frozen sandwiches of the kind sold by Petitioner in this case, which are unable to be consumed in
a frozen condition. The frozen chicken sandwiches are of a type commonly sold for off premises
consumption and are in the same form and condition, quantities and packaging as in
establishments which are food stores. Thus, the frozen chicken sandwiches sold by Petitioner in
this case are exempt from sales tax since they are food sold for human consumption as described
in section 1115(a)(1) of the Tax Law and are not food subject to the imposition of the section
1105(d) tax.

DATED: April 27, 2005

NOTE:

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

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