Which of a supermarket's products are taxable: fudge, halva, maple sugar candy, prepackaged sushi, or food gift baskets?

Plain-English summary

The petitioner runs a supermarket chain whose stores (for this question) have no on-premises eating areas. It asked whether five items it sells are subject to sales tax: fudge (made and sold by the pound in the bakery section), halva (bought from a manufacturer, sold in the deli/kosher section), maple sugar candy, prepackaged sushi (sold cold from a refrigerated case), and gift baskets of fruits, nuts, cheeses, and other food.

The Office of Counsel concluded the fudge, halva, and maple sugar candy are taxable, while the sushi and the gift baskets (as described) are exempt food.

• Fudge, halva, maple sugar candy = taxable candy/confectionery. Food sold for human consumption is generally exempt under Tax Law 1115(a)(1), but candy and confectionery are carved out. Fudge is candy even though it's sold in the bakery section (location is irrelevant) and it isn't a baked good. Halva is specifically listed as a confection in 20 NYCRR 528.2(a)(4). Maple sugar (plain) would be exempt, but "maple sugar candy" is labeled/sold as candy, so it's taxable.
• Prepackaged sushi = exempt when sold cold/unheated, in the same form and packaging used by ordinary food stores for off-premises consumption. But sushi is taxable if sold for on-premises eating (Tax Law 1105(d)(i)(1)) or served plated as a ready-to-eat meal (20 NYCRR 527.8(e)(3)(ii)). This is the Department's current position; Price Chopper, TSB-A-98(38)S, no longer reflects current policy to the extent it differs.
• Food gift baskets = exempt when the basket, bow, and gift card are ancillary -- e.g., the basket's cost is minimal relative to the food and the customer doesn't pick a particular basket. If the basket is more than minimal or customer-selected, the store is treated as selling the basket, and the whole charge is taxable unless the food is separately stated. (And if the basket holds both taxable and exempt items, the full charge is taxable unless the exempt food is separately stated.)
• Packaging: the basket and wrapper are exempt packaging materials under Tax Law 1115(a)(19) when the store buys them, but bows and gift cards are taxable for the store to purchase.

What this means for you

Grocers, bakeries, and specialty-food retailers

"Candy or confectionery" is a meaningful line: fudge, halva, and similar sweets are taxable no matter which department sells them, while plain baked goods and plain maple sugar are exempt. Watch labels and advertising -- a product marketed as "candy" is taxable even if its base ingredient (maple sugar) would be exempt.

Prepared-food and sushi sellers

Cold, prepackaged food sold in ordinary store packaging for taking home is exempt; the moment it's sold for eating on premises or plated as a meal, it's taxable. Self-serve cold cases generally stay exempt; a sushi bar or platter service does not.

Gift-basket sellers

Keep the basket/bow/card minor and not separately chosen to keep the sale exempt food, or separately state the food charge. Remember you owe tax on bows and gift cards you buy, even though baskets and wrappers are exempt packaging.

Common questions

Q: It's sold in the bakery -- isn't fudge a baked good?
A: No. Fudge isn't made by baking, so it's candy/confectionery and taxable regardless of which section sells it.

Q: Is all sushi taxable?
A: No. Cold, prepackaged sushi for off-premises eating is exempt; sushi eaten on premises or served plated as a meal is taxable.

Q: When is a gift basket taxable?
A: When the basket is more than a minimal, ancillary element (e.g., it's pricey or customer-selected), or it mixes taxable and exempt items -- then the whole charge is taxable unless the exempt food is separately stated.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1115(a)(1) (food exemption; excludes candy and confectionery)
• Tax Law section 1105(d) (food sold by restaurants/establishments)
• Tax Law section 1115(a)(19) (packaging materials exemption)
• 20 NYCRR 528.2(a)(4) (definition of candy and confectionery; lists halva)
• 20 NYCRR 528.2(a)(2) and (a)(5) (baked goods and cooking/baking items exempt)
• 20 NYCRR 527.8(e)(3)(ii) (sushi taxable as meals on plates/platters)
• TSB-A-98(38)S (Price Chopper; superseded as to sushi)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a09_54s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-09(54)S
Sales Tax
October 9, 2009

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S081027B

On October 27, 2008, the Department of Taxation and Finance received a petition for Advisory
Opinion from name and address redacted. Petitioner asks whether its sales of any of the following
products are subject to sales tax: fudge, halva, maple sugar candy, sushi, and gift baskets containing food
products. The fudge, halva, and maple sugar candy are taxable when sold by petitioner. The sushi and
gift basket products described in the request for the advisory opinion are exempt from sales tax when sold
by Petitioner.
Facts
Petitioner operates a chain of supermarkets. None of the stores as to which its inquiry pertains
have areas for consuming food on premises.
Petitioner prepares and sells different types of fudge products (walnut fudge, white chocolate
peanut butter fudge, and chocolate fudge) by the pound at the bakery section of its supermarkets.
Halva is a product Petitioner purchases from a manufacturer. The manufacturer’s label for the
product describes halva as “a great dessert choice for any dinner party, tea time or simple snack.” Halva
is sold in the deli or kosher sections of Petitioner’s supermarkets.
Petitioner also sells prepackaged sushi products purchased from a manufacturer. These sushi
products are sold from a refrigerated case. None of the supermarkets in question have a sushi bar or
otherwise have an area where the sushi products can be eaten on the premises.
Petitioner sells gift baskets that contain fruits, nuts, cheeses and other non-taxable products. The
baskets can include shrink sleeves, bows, and gift cards. Petitioner’s receipt to its customer does not
itemize any of the components of the baskets.
Petitioner also sells maple sugar candy.
Analysis
Tax Law section 1105(a) imposes sales tax on the sale of tangible personal property. Food
products, except candy and confectionery, when sold for human consumption, are exempt from the sales
tax imposed by section 1105(a). See Tax Law §1115(a)(1). Tax Law section 1105(d) imposes sales tax
on the sale of food by restaurants or other establishments in all instances where the sale is for
consumption on the premises where sold and in those instances where the sale is for consumption off the
premises of the vendor, unless the food is sold in an unheated state and in 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.

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Sales Tax
October 9, 2009

Candy and confectionery include, without limitation, candy of all types; chocolate (plain or
mixed with other products); glazed or sugar-coated fruits, nuts, peanuts, popcorn or other products;
chewing gum; mints; lollipops; fruit flavored sticks; fruit drops; licorice; pastilles; cotton candy;
marzipan; halva and any similar product regarded as candy or confectionery based on its normal use or as
indicated on the label or in the advertising thereof. See 20 NYCRR 528.2(a)(4). Items advertised and
sold for use in cooking and baking, such as chocolate morsels and glazed fruit bits are exempt from tax.
See 20 NYCRR 528.2(a)(5). Baked goods are also exempt from tax. See 20 NYCRR 528.2(a)(2).
The fudge, maple sugar candy, and halva sold by petitioner constitute candy or confectionery
products for purposes of sales tax. Merriam-Webster’s unabridged dictionary defines “confectionery” as
an edible sweet, and defines “fudge” as “a soft creamy candy made typically of sugar, milk, butter, and
flavoring.” Petitioner states that it sells fudge in the bakery section of its supermarkets. The fact that the
fudge is sold in the bakery is not relevant. Further, fudge is not prepared by baking and is not a baked
good for sales tax purposes. Therefore, the sale of this product is subject to sales tax.
Halva, also known as halvah, is listed in the sales tax regulations as a confectionery product.
Merriam-Webster’s unabridged dictionary defines “halva” as a “flaky confection of crushed sesame seeds
in base of honey or other syrup.” Therefore, the sale of this product is subject to sales tax.
Maple syrup and maple sugar are exempt food items. Maple sugar products therefore may
qualify for exemption from sales tax as food items if no other sugar, flavors, or ingredients are added.
However, in the present case, as its name indicates, maple sugar candy is labeled or advertised as a candy
or confectionery product. Therefore, its sale is subject to sales tax.
Petitioner’s sales of prepackaged sushi products for off-premises consumption are exempt from
sales tax because the product constitutes food sold in an unheated state and in the same form and
condition, quantities, and packaging commonly used by other food stores that are not principally engaged
in selling food prepared and ready to be eaten. However, sales of sushi for consumption on the store
premises are subject to sales tax. See Tax Law §1105(d)(i)(1). Further, sushi is taxable when sold as
meals ready to be eaten when arranged on plates or platters as individual or multiple servings. See 20
NYCRR 527.8(e)(3)(ii). These conclusions represent the current position of the Department. To the
extent Price Chopper Operating Co., Inc., Adv Op Comm T & F, June 2, 1998, TSB-A-98(38)S, or any
other advice from the Department indicates a contrary position, it does not represent current policy.
The sale of gift baskets containing fruits, nuts, cheeses, and other non-taxable products are
exempt from sales tax as the sale of food if the basket, wrapper, bow and gift card are ancillary elements
of the sale. For example, if the cost of the basket is minimal in relation to the aggregate cost of the food
items, and the customer is not given the option to select a particular basket, the basket would be
considered ancillary. Alternatively, if the cost of a basket is more than minimal, or the basket is selected
by the customer from a number of available choices, it could be more than an ancillary element of the
sale. If the basket, wrapper, bow, and gift card are ancillary elements of the sale, these items are not
deemed sold by Petitioner as such for purposes of sales tax; therefore, Petitioner would be the retail
purchaser of these items. If the basket, wrapper, bow, and gift card are not ancillary elements of the sale,
Petitioner will be deemed to be selling these items and will be required to collect sales tax on its sales
receipts for the food basket unless Petitioner itemizes a separate charge for the food, in which case sales
tax would be due only on the itemized charge for the basket, wrapper, bow, and gift card. It should be
noted that, if the contents of the gift basket include both exempt and taxable items (e.g., glazed or sugarcoated fruits and nuts are subject to sales tax), then the full charge for the gift basket is taxable, unless the

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Sales Tax
October 9, 2009

price of the exempt food items is separately stated. See 20 NYCRR 528.2(a)(4) and A Guide to Sales Tax
for Drugstores and Pharmacies, Publication 840(8/98).
Tax Law section 1115(a)(19) exempts from sales and use tax cartons, containers, and wrapping
and packaging materials and supplies, and components thereof, for use and consumption by a vendor in
packaging or packing tangible personal property for sale, and actually transferred by the vendor to the
purchaser. The basket and wrapper qualify as packaging material for purposes of section 1115(a)(19).
Therefore, Petitioner does not owe sales and use tax on its purchase of these materials. However,
Petitioner is required to pay sales and use tax on its purchase at retail of bows and gift cards, which are
not packaging materials.

DATED: October 9, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to
the facts set forth therein and is binding on the Department only with respect to
the person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued
or for the specific time period at issue in the Opinion.