Is a bottled puree drink of vegetables, fruits, nuts, and seeds subject to NY sales tax, or is it exempt food?

Plain-English summary

The petitioner makes a bottled beverage -- a thick puree of water plus soybeans, coconut, almonds, pine nuts, grains (millet, quinoa, amaranth), seeds, corn, many fruits, beets, cactus, sweet potatoes, agave syrup, and spices (a second version adds peanut butter). It's not carbonated, has no refined carbs or cane sugar, must be refrigerated, is sold at retail in 16 oz. bottles, and isn't meant to be consumed where sold. The petitioner asked whether its sale is taxable.

The Office of Counsel concluded it is exempt:

• The general food exemption. Food, food products, beverages, dietary foods, and health supplements sold for human consumption are exempt from sales and use tax (Tax Law 1115(a)(1)).
• It's not a taxable carve-out. The exemption excludes (i.e., taxes) fruit drinks with under 70% natural juice; soft drinks, sodas, and soda-fountain-type beverages (other than coffee, tea, or cocoa); and alcoholic beverages. The petitioner's beverage isn't a fruit drink, soft drink, or alcoholic drink.
• Treated like exempt vegetable juice. The regulations provide that vegetable juices -- single, combined, or combined with another food product -- are exempt beverages (20 NYCRR 528.2(b)(5)). This puree, made from vegetables combined with other food products, is similar to vegetable drinks previously found exempt (TB-ST-525).
• Result: the retail sale of the beverage is not subject to sales tax.

What this means for you

Sales of the petitioner's puree beverage

The Department found that this specific bottled beverage, made from vegetables and other food products, was exempt under Tax Law § 1115(a)(1). It said the beverage did not appear to be an excluded fruit drink, soft drink, or alcoholic drink. The opinion does not decide the tax treatment of other puree or juice products.

Off-premises matters

This exemption is for a bottled product sold to take away. Food and drink sold for on-premises consumption (restaurant-style) is a different, taxable rule.

Common questions

Q: My drink has sugar (agave) -- does that make it a taxable soft drink? A: For the petitioner's beverage, the Department concluded the retail sale was exempt and said it did not appear to fall within the listed beverage exclusions.

Q: Is vegetable juice taxable in New York?
A: No. Vegetable juices -- alone, combined, or combined with other food products -- are exempt beverages.

Q: Would selling it for on-site consumption change things? A: Yes -- food and drink sold for on-premises consumption is taxable under different rules. This exemption is for the bottled, take-away product.

Citations and references

• Tax Law section 1115(a)(1) (exemption for food, food products and beverages)
• 20 NYCRR section 528.2(b)(5) (vegetable juices are exempt beverages)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a13_34s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-13(34)S
Sales Tax
September 10, 2013

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

PETITION NO. S130325A

The Department of Taxation and Finance received a Petition for Advisory Opinion from name and address redacted. Petitioner asks whether the sale of its beverage is subject to sales tax. We conclude that the sale of Petitioner’s beverage is not subject to sales tax. Facts Petitioner’s beverage is a proprietary blend of water, vegetables, nuts, fruits, seeds and spices with the consistency of a thick puree. The beverage contains the following ingredients, as listed on the product label: water, soybeans, coconut, almonds, pine nuts, millet, quinoa, amaranth, flaxseeds, pumpkin seeds, maze (white corn and purple corn), papaya, bananas, mangos, watermelon, plantains, beets, cactus (Napolitos), mamey, yucca, sweet potatoes, pomegranates, dried figs, agave syrup, flaxseed oil, lecithin, sea moss, ginger, aloe, cinnamon, sea salt, vanilla extract and nutmeg. A second version of the beverage will include peanut butter. The beverage is not carbonated and contains no refined carbohydrates and no cane sugar. It is perishable and must be refrigerated. The beverage will be sold at retail in 16 oz. bottles and is not intended to be consumed on the premises where it is sold. Analysis Section 1115(a)(1) of the Tax Law generally provides that food, food products, beverages, dietary foods and health supplements sold for human consumption are exempt from sales and use taxes. The beverages that are excluded from this exemption, and therefore taxable, are: fruit drinks which contain less than seventy percent of natural fruit juice; soft drinks, sodas and beverages such as are ordinarily dispensed at soda fountains or in connection therewith (other than coffee, tea, or cocoa); and beer, wine or other alcoholic beverages. Petitioner’s beverage does not appear to be a fruit drink, soft drink, or alcoholic drink as described in the exclusions to § 1115(a)(1). The Department’s regulations further provide that, “[v]egetable juices, whether made of a single vegetable, or a combination of vegetables, or a combination of a vegetable and other food product are exempt beverages.” See 20 NYCRR § 528.2(b)(5). Petitioner’s beverage is made out of a combination of vegetables and other food products, and is similar to various vegetable drinks previously

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TSB-A-13(34)S
Sales Tax
September 10, 2013

found to be exempt. See TB-ST-525. Therefore, the retail sale of Petitioner’s beverage is not subject to sales tax.

DATED: September 10, 2013

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.