Are a sandwich manufacturer's wholesale sales of sandwiches to convenience stores subject to New York sales tax?

Plain-English summary

A company manufactures sandwiches at its own facility and sells them at wholesale to convenience stores in New York, New Jersey, and Pennsylvania, where they're resold for off-premises consumption. It buys the raw ingredients, makes and packages the sandwiches, and provides no catering. It asked whether its sandwich sales are subject to sales tax.

The Office of Counsel concluded the company's wholesale sandwich sales are NOT taxable.

• The "sandwich" rule is about WHO sells. Tax Law 1105(d) taxes sales of food and drink -- including sandwiches -- when sold in or by restaurants, taverns, or other establishments, or by caterers. Sandwiches are singled out so they're taxed even when sold cold/to-go by such a seller.
• A manufacturer isn't a restaurant. What distinguishes this company is that it manufactures sandwiches exclusively for sale at wholesale to convenience stores. Since sandwiches are taxable under 1105(d) only when sold by a restaurant or other establishment, the company's wholesale sales aren't taxed under 1105(d) -- it's simply selling tangible personal property that isn't otherwise subject to tax.
• The convenience stores owe the tax. The convenience stores that buy the sandwiches are establishments covered by 1105(d), so their retail sales of the sandwiches to customers are subject to sales tax.

What this means for you

Food manufacturers and commissaries selling wholesale

If you make prepared food and sell it at wholesale to stores that resell it, you're selling tangible personal property -- not running a restaurant -- so the special 1105(d) "restaurant/caterer" tax on sandwiches and prepared food doesn't apply to your sales. (A wholesale buyer who resells should give you a resale certificate.) The line that matters is whether you are the restaurant/establishment/caterer making the taxable retail sale.

Convenience stores and similar retailers

If you're an establishment that resells sandwiches and prepared food to the public, your sales are taxable under 1105(d) -- even when the food is cold and sold to-go -- because sandwiches are taxed when sold by that kind of seller.

Common questions

Q: We make sandwiches in a central kitchen and truck them to our own delis. Is that the same as this ruling?
A: Not necessarily. This ruling turns on selling at wholesale to separate stores. If you sell the sandwiches to the public at your own establishment, you're the seller under 1105(d) and those retail sales are taxable.

Q: Does it matter that the sandwiches are cold and packaged?
A: For a restaurant/establishment/caterer, no -- sandwiches are taxed under 1105(d) even when sold cold and ready-to-go. The reason this company isn't taxed is that it's a manufacturer selling wholesale, not that the sandwiches are cold.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1105(d)(i)(3) (tax on food/drink sold by restaurants and other establishments)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(7)S
Sales Tax
February 23, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S091112A

On November 12, 2009, the Department of Taxation and Finance received a Petition for
Advisory Opinion from name and address redacted. Petitioner asks whether its sales of sandwiches
are subject to sales tax. Petitioner’s receipts from the sale of sandwiches are not subject to sales tax.
Petitioner is selling tangible personal property that is not subject to tax.
Facts
Petitioner manufactures and sells prepared food products, primarily sandwiches, to
convenience stores located in New York, New Jersey, and Pennsylvania. In addition to selling the
sandwiches for off-premises consumption, these stores sell grocery items such as milk, eggs, coffee,
cereal, bread, and beer.
Petitioner’s sandwiches are prepared and packaged at a manufacturing facility owned by
Petitioner. Petitioner purchases the raw ingredients used to prepare the sandwiches. Petitioner does
not provide catering services. It simply manufactures sandwiches and sells them to convenience
stores.
Analysis
Tax Law section 1105(a) imposes sales tax on the receipts from the sale of tangible personal
property. Section 1105(d)(i)(3) of the Tax Law imposes sales tax on the receipts from every sale of
beer, wine or other alcoholic beverages 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 New York, or by caterers, in those instances where the sale is made 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. What
distinguishes Petitioner from a restaurant or other establishment whose receipts are subject to sales tax
under Tax Law section 1105(d) is that Petitioner manufactures sandwiches exclusively for sale at
wholesale to convenience stores. Since sandwiches are subject to sales tax under Tax Law section
1105(d) only when sold by a restaurant or other establishment, Petitioner’s sales of sandwiches are not
subject to tax under section 1105(d). Petitioner is selling tangible personal property that is not subject
to sales tax.

TSB-A-10(7)S
Sales Tax
February 23, 2010

-2-

The convenience stores that purchase the sandwiches are establishments covered by Tax Law
section 1105(d); therefore, their sales of the sandwiches are subject to sales tax under section 1105(d).

DATED: February 23, 2010

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.