Is a harbor 'party cruise' fare taxable when it includes a meal and drinks, and would a sightseeing-only ticket be taxable?

Plain-English summary

An operator runs ~3.5-hour "party cruises" around New York Harbor (100+ passengers), marketed as sightseeing past Liberty Island, the Battery, and the Brooklyn Bridge. The fare includes a hot catered buffet (served by the caterer's staff for a half hour) and two drink tickets per passenger at an onboard bar (the boat owner holds the liquor license). There's a dining cabin with cloth-covered tables and a DJ. It asked whether the fare is taxable, and whether a food-free sightseeing ticket would be.

The Office of Counsel concluded:

• The fare with food and drink is fully taxable. Tax Law section 1105(d) taxes receipts for food and drink sold by restaurants, taverns, caterers, and similar establishments -- including any cover, minimum, entertainment, or other charge. By providing meals and beverages with dining and bar facilities, the operator runs an establishment subject to 1105(d).
• The food and drink are not "incidental." They're incidental only when de minimis, requiring no significant time/expense to prepare or serve, and carrying no separate charge. Here the hot food takes significant preparation, caterer staff serve it, and the bar dispenses alcohol under a license -- so the food/drink are a real part of the cruise. The entire charge is taxable (section 1105(d)/(f); TSB-A-07(27)S; TSB-A-98(46)S).
• A sightseeing-only ticket isn't taxable. If a ticket is essentially for the cruise and doesn't entitle the passenger to food or drink beyond something merely incidental, those receipts aren't taxable.

What this means for you

Cruise, tour, and event operators

Bundling a real meal and drinks into the ticket makes the whole ticket taxable as restaurant/caterer food and drink -- you can't shelter it by calling the event "sightseeing." The line is whether the food/drink are more than incidental.

What "incidental" actually requires

All three: de minimis, no significant prep/serving effort, and no separate charge. A hot catered buffet with servers and a staffed bar fails the test.

Splitting the offering

A genuine food-free ticket (or one with only trivial refreshments) can be sold without sales tax -- but if the ticket entitles the passenger to a real meal or drinks, expect the full fare to be taxable.

Common questions

Q: We market it as a sightseeing cruise -- why is the fare taxable?
A: Because the fare includes a catered hot meal and bar drinks that aren't incidental, the whole charge is taxable as food/drink under section 1105(d).

Q: What makes food and drink 'incidental'?
A: It must be de minimis, take no significant time or expense to prepare/serve, and carry no separate charge -- all three.

Q: Could we sell a non-taxable cruise ticket?
A: Yes -- a ticket that's essentially for the sightseeing cruise and doesn't entitle the passenger to more-than-incidental food or drink isn't taxable.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(d) (sales tax on food and drink sold by restaurants, taverns, caterers, and similar establishments)
• Tax Law section 1105(f) (admission and amusement charges)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(30)S
Sales Tax
July 15, 2015

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

PETITION NO. S120507A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTED (“Petitioner”). Petitioner asks whether its
receipts for a party cruise around New York Harbor are subject to sales tax when the price the
passenger pays includes a meal and drinks. Petitioner also asks if the charge for the cruise would
be subject to sales tax if it were to offer two types of tickets: one just for the cruise without any
meal, and one that would include a meal.
We conclude that when Petitioner provides passengers with a meal and beverages as part
of the regular cruise fee, the entire charge for the cruise will be subject to sales tax under Tax
Law § 1105(d) or §1105(f). If a ticket for a cruise does not entitle the passenger to the provision
of any food or drink, the ticket receipts would not be subject to sales tax.
Facts
Petitioner leases vessels that it uses to provide public cruises around New York Harbor.
Each vessel can accommodate over 100 passengers. Petitioner markets the cruises as “party
cruises.” The cruises, which last approximately three and a half hours, begin and end at the same
location. The cruises begin in the late afternoon or in the early evening. Some cruises end
around midnight. The cruises are usually conducted during weekends or holidays.
The vessels cruise New York Harbor and sail around or near famous landmarks, such as
Ellis Island, Liberty Island, the Battery, and the Brooklyn Bridge. Petitioner emphasizes that it is
offering a sightseeing cruise. Petitioner’s web site includes testimonials from passengers about
the views of the City and harbor afforded by the cruises.
Each vessel has an area with tables and chairs for dining (the main cabin). The tables are
covered with table cloths. This cabin cannot simultaneously accommodate all potential
passengers on a cruise. For example, a vessel might accommodate 120 persons but the main
cabin might seat only 80 persons. Petitioner does not accept reservations for the dining in this
area. Seating is on first come, first use basis. Parties of passengers have no guarantee that they
will be able to sit together in the main cabin.
Petitioner provides what it describes as a “hot appetizer buffet” to its passengers during
the cruises. Petitioner’s advertisements mention the buffet, but also indicate that it is not an
unlimited buffet. The meal is available for one half hour during a cruise. Passengers may sit in
the main cabin at any time during a cruise. The use of the main cabin is not restricted to when
the buffet is available. The food is prepared offsite by a third-party caterer hired by Petitioner.
The caterer has staff on the vessel who dispense the food to Petitioner’s passengers at the buffet

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July 15, 2015

tables. The caterer bills Petitioner for its food service and collects sales tax from Petitioner on its
receipts.
Each vessel contains a bar serving liquor operated by the boat owner, who has a liquor
license to operate the bar. Petitioner gives each passenger two tickets that can be used to obtain
two drinks at the bar on the vessel. Bottled water, soda, domestic beer, wine and non-premium
brands of liquor may be obtained with these tickets. The boat owner charges Petitioner a fee for
the drinks served at the bar in exchange for beverage tickets. The boat owner collects sales tax
from Petitioner on its receipts for these drinks. Passengers must pay cash at the bar to obtain
additional drinks. The boat owner keeps all these receipts. The vessels have a lounge area
contiguous to the bar.
While passengers are permitted to bring food on the vessel, the boat owner prohibits
passengers from bringing alcoholic beverages onboard. This policy is enforced in part to
encourage bar sales, but also for security and safety reasons.
Each cruise has a disc jockey who plays recorded music and provides information and
commentary about the sights around New York Harbor. The amount of music played depends
on the type of cruise. Each vessel has an indoor area where passengers can dance.
Analysis
Tax Law § 1105(d) 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
this state, or by caterers, including in the amount of such receipts any cover, minimum,
entertainment or other charge made to patrons or customers. Petitioner is operating an
establishment subject to sales tax under Tax Law § 1105(d) when it provides both beverages and
meals during its cruises. It provides facilities for its passengers to consume meals and beverages
on the vessels. The main cabin contains a buffet, tables with cloth coverings and chairs. While
passengers can use this cabin when the buffet is not being served, it constitutes a dining area
when the buffet is served. The vessels also include a bar area with a contiguous lounge.
Even though Petitioner is providing what it characterizes as a sightseeing cruise in
conjunction with the provision of food and drink, the cruise ticket is subject to sales tax under
Tax Law § 1105(d) because the food and drink is not incidental to the boat cruise. See TSB-A07(27)S. Food and drink provided in connection with a cruise are incidental when they are a de
minimis element of the cruise, no significant time and/or expense is devoted to the preparation or
serving of the food or drink, and no separate charge is made for the food and drink. See TSB-A98(46)S. The types of food and drinks that Petitioner provides and the means Petitioner uses to
provide them establish that the provision of food and drink is not an incidental aspect of the
cruise.
Petitioner pays a caterer to provide catering services on board the vessel. The caterer
serves hot food that takes significant time to prepare. The caterer’s staff dispenses the food to
passengers. Petitioner also pays the boat owner to serve drinks from the onboard bar to
Petitioner’s passengers. The drinks include alcoholic beverages, which require the boat owner to

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exercise its liquor license to dispense. In summary, Petitioner pays vendors to provide services
subject to sales tax under Tax Law § 1105(d). Petitioner does this so its passengers can consume
hot meals and beverages in a dining area and a bar area even though the provision of these items
is not a necessity for a cruise lasting about three hours. Therefore, based on the facts presented,
Petitioner’s receipts for cruises would be subject to sales tax under Tax Law § 1105(d).
Petitioner also asks whether its receipts from ticket sales would be taxable if the ticket
did not entitle the passenger to food or drink. As long as the price of the ticket is essentially for a
sightseeing cruise and does not entitle the passenger to food or drink that is more than incidental
to the charge for the cruise itself, the receipts from ticket sales will not be subject to sales tax.

DATED: July 15, 2015

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.