Are canned coffee-based energy drinks taxable soft drinks, or exempt coffee, when sold to go?

Plain-English summary

Genovese Drug Stores, Inc. sells canned Starbucks Doubleshot Energy coffee drinks (coffee, mocha, and vanilla flavors) for off-premises consumption (to go). On each label, Starbucks coffee is the first listed ingredient, followed by reduced-fat milk, skim milk, sugar, and other ingredients. Genovese asked whether these drinks are subject to sales and use tax.

The Office of Counsel concluded the drinks are exempt:

• Food/beverages are exempt, with exclusions. Section 1115(a)(1) exempts food, food products, and beverages sold for human consumption, except candy/confectionery, low-juice fruit drinks, "soft drinks, sodas and beverages such as are ordinarily dispensed at soda fountains... (other than coffee, tea and cocoa)", and alcoholic beverages, which are taxable.
• Coffee is carved out of the taxable soft-drink category. Even within the soft-drink exclusion, coffee, tea and cocoa are not taxable.
• This product is coffee. Under FDA labeling rules, ingredients are listed by descending weight (21 CFR 101.4); here coffee is listed first, and the product is marketed as a coffee. So it is treated as coffee, which is exempt under 1115(a)(1)/1110(a) when sold for off-premises consumption.

Result: these canned coffee energy drinks are exempt from sales and use tax when sold to go.

What this means for you

Grocers and convenience/drug stores

A coffee-based ready-to-drink beverage sold to go is generally exempt -- coffee (like tea and cocoa) is specifically excluded from the taxable "soft drinks and sodas" category. The "energy" branding doesn't change that if the drink is genuinely a coffee.

Look at the ingredient order and marketing

A useful, objective test is the ingredient list (coffee first, by weight, per FDA rules) plus how the product is marketed. If coffee predominates and the product is sold as coffee, it's exempt coffee, not a taxable soft drink.

Off-premises vs. on-premises

This opinion is about drinks sold for off-premises consumption (canned, to go). Beverages sold for on-premises consumption (e.g., at a restaurant/cafe) can be taxed differently under the restaurant rules.

Common questions

Q: Is a canned "energy" coffee drink taxable as a soft drink?
A: No, when it's genuinely coffee (coffee is the predominant ingredient) and sold to go. Coffee is exempt and carved out of the taxable soft-drink category.

Q: How do I tell if my bottled drink counts as coffee?
A: Check the ingredient list (listed by weight under FDA rules) and the marketing. If coffee is the first ingredient and it's sold as coffee, it's treated as exempt coffee.

Q: Does the sugar or milk make it taxable?
A: No. The presence of sugar/milk doesn't override the coffee carve-out for a product that is coffee sold for off-premises consumption.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1115(a)(1) (exemption for food, food products, and beverages)
• Tax Law section 1110(a) (compensating use tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-14(20)S
Sales Tax
July 14, 2014

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S140605A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
Genovese Drug Stores, Inc. (“Petitioner”). Petitioner asks whether sales of Starbucks
Doubleshot® Energy coffee drinks are subject to New York State and local sales and use taxes.
Facts
Petitioner's stores sell Starbucks Doubleshot® Energy coffee drinks in cans for offpremises consumption. Product labels supplied by Petitioner for the coffee, mocha and vanilla
flavored Starbucks Doubleshot® Energy coffee drinks list as the primary ingredients:
•
•
•
•

Starbucks® coffee (water, coffee);
reduced fat milk;
skim milk;
sugar;
and various other ingredients.
For all of these products, Starbucks® coffee is the first ingredient listed.

Analysis
Section 1105 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:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
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:

-2-

TSB-A-14(20)S
Sales Tax
July 14, 2014

(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 US Food and Drug Administration regulations provide that ingredients must be listed
by common or usual name in descending order by predominance of weight on either the
principal display panel or the information panel of the product. 21 CFR § 101.4 Starbucks
Doubleshot® Energy coffee drinks are marketed as a coffee and coffee is listed as the first
ingredient on the label Petitioner provided. Petitioner's stores sell Starbucks Doubleshot®
Energy coffee drinks in cans for off-premises consumption. Coffee is exempt from sales tax
pursuant to §§ 1115(a)(1) and 1110(a) of the Tax Law. Accordingly, sales of Starbucks
Doubleshot® Energy coffee drinks as described in this Opinion are exempt from sales and use
taxes when sold for off-premises consumption.

DATED: July 14, 2014

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.