Are wasabi and soy seasoned almonds taxable candy/confectionery, or exempt food, when the seasoning contains some sugar?

Plain-English summary

The Petitioner is a retail pharmacy and general-merchandise chain that sells, among many products, Blue Diamond Bold Wasabi & Soy Almonds. The ingredient list includes almonds plus a seasoning that contains sugar along with vegetable oil, salt, soy sauce, horseradish, onion and spices. Because sugar is in the mix, the Petitioner asked whether the almonds are "candy and confectionery" -- which would be excluded from the food exemption and taxable.

The Office of Counsel concluded the almonds are exempt food, not candy:

• Food is exempt; candy is not. Section 1115(a)(1) exempts food and food products, but candy and confectionery are excluded from the exemption (taxable). Food and food products include snacks other than candy and confections (20 NYCRR 528.2(a)(2)).
• What counts as candy. Candy and confectionery include candy of all types, glazed or sugar-coated fruits, nuts, popcorn, etc., and any similar product regarded as candy based on its normal use, label, or advertising (20 NYCRR 528.2(a)(4)).
• These almonds aren't candy. Generally nuts that are not glazed or sugar-coated are exempt. These are not glazed or sugar-coated -- they're dusted with a spicy, salty wasabi-soy flavoring that tastes savory, not sweet. The mere addition of sugar does not automatically make a product candy (TSB-A-09(38)S).
• The label confirms it. The package describes them as "bold," "intense taste," "smart snacking," with a heart-health note -- language associated with snacks, not candy. So they are not regarded as candy based on normal use, label, or advertising.

Result: the wasabi & soy almonds are exempt food under 1115(a)(1).

What this means for you

Grocers, pharmacies, and snack sellers

Seasoned or flavored nuts are generally exempt food -- they only become taxable candy if they're glazed or sugar-coated, or are otherwise marketed/regarded as candy. A savory or spicy coating (even one that contains some sugar) keeps them in the exempt-food category.

Sugar in the recipe is not the test

Don't assume that any sugar in the ingredients makes a snack taxable candy. New York looks at the whole product -- the coating (glazed/sugar-coated vs. savory), the taste, and how the product is labeled and advertised.

Labeling and marketing can decide close cases

Words like "snack," "smart snacking," "bold/intense," and health claims point to exempt food. Marketing a product as candy (or selling it glazed/sugar-coated) points the other way.

Common questions

Q: Are flavored almonds taxable because the seasoning contains sugar? A: No. Nuts that aren't glazed or sugar-coated are exempt food; some sugar in a savory seasoning doesn't make them candy.

Q: When are nuts taxable candy?
A: When they're glazed or sugar-coated, or otherwise marketed/regarded as candy or confectionery based on their normal use, label, or advertising.

Q: Does the label matter?
A: Yes. Marketing the product as a "snack" (rather than candy) supports exempt-food treatment.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1115(a)(1) (exemption for food and food products)
• 20 NYCRR section 528.2 (food and food products; candy and confectionery)

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_25s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-14(25)S
Sales Tax
July 22, 2014

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S131113A

On November 13, 2013, the Department of Taxation and Finance received a Petition for Advisory Opinion from REDACTED REDACTED REDACTED REDACTED REDACTED REDCTED REDACTED (Petitioner). Petitioner asks whether wasabi and soy seasoned almonds are subject to New York State and local sales and use tax. We conclude that this product is exempt from sales and use tax under Tax Law
§ 1115(a)(1).
Facts
Petitioner operates a retail pharmacy and general merchandise chain that sells prescription drugs and a wide assortment of other products. One of the products it sells is Blue Diamond Bold Wasabi & Soy Almonds (hereinafter “Wasabi Almonds”). The ingredients of the Wasabi Almonds, in the order listed on a its package are: “almonds, vegetable oil (canola, safflower and/or sunflower), sugar, modified corn starch, salt, soy sauce (soybean, wheat, salt) horseradish, onion, spice, fractionated coconut oil and/or palm kernel oil, garlic, maltodextrin, yeast extract, natural flavor, citric acid, disodium guanylate and disodium inosinate.” Petitioner asks whether the presence of sugar in the ingredients would make the Wasabi Almonds “candy and confectionery” and, therefore, excluded from the sales and use tax exemption for food and food products. Analysis Tax Law § 1105(a) imposes sales tax on receipts from the retail sale of tangible personal property. Tax Law § 1115(a)(1) exempts food and food products from sales tax. One of the exclusions from this exemption is “candy and confectionery.” Sales and Use Tax Regulation § 528.2(a)(2) defines food and food products as “edible commodities” whether prepared, processed, cooked, raw, canned or in any other form, which are generally regarded as food. Food and food products include, as relevant here, snacks other than candy and confections.

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TSB-A-14(25)S
Sales Tax
July 22, 2014

Sales and Use Tax Regulation § 528.2(a)(4) provides that “[c]andy and confectionery include, without limitation, candy of all types . . . glazed or sugar-coated fruits, nuts, peanuts, popcorn, or other products . . . 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.” Publication 840, “A Guide to Sales Tax for Drugstores and Pharmacies” identifies nuts and nut products and baked goods and snacks (except candy and confections) as exempt items. We conclude that the Wasabi Almonds at issue here are not candy and confectionery. Generally, nuts, other than glazed or sugar coated nuts, are regarded as exempt food items. The nuts at issue here are not glazed or sugar coated. Rather, they are dusted with a wasabi and soy flavoring, which consists of a blend of sugar, vegetable oil, salt, soy sauce, horseradish, onion and other spices. The flavoring evokes a spicy, salty taste when consumed, rather than a sweet or sugary taste. These flavors are not typically associated with candy and confectionery. The addition of sugar does not automatically make a food product “candy or confectionery.” See, e.g., TSB-A-09(38)S. Furthermore, the product is not labeled as candy or confectionery. Instead, the label describes the nuts as “bold” and having “intense taste.” The label also includes the words “smart snacking” and a statement that consumption of a certain quantity of almonds “as part of a diet low in saturated fat and cholesterol may reduce the risk of heart disease.” These statements are not typically associated with candy or confectionery and demonstrate that the product is not regarded as candy or confectionery based on its normal use, as indicated on the label, or in its advertising. See Sales Tax Regulation § 528.2(a)(4) Based on the above analysis, we conclude that Wasabi Almonds are not candy or confectionery, but rather are exempt food under Tax Law § 1115(a)(1).

DATED: July 22, 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.