Are sales of warm, freshly baked cookies subject to New York sales tax even for take-out or delivery?

Plain-English summary

A company's whole business is selling warm cookies. The cookies are baked in its New York stores, kept warm at the counter, and even delivery orders are kept warm in heat sleeves until they reach the customer. It sells (i) a few cookies for immediate eating, (ii) to-go boxes of several to a few dozen, and (iii) delivery orders. It asked whether the cookie sales are taxable under Tax Law section 1105(d)(i).

The Office of Counsel concluded the sales are taxable:

• Tax Law section 1105(d)(i) taxes food and drink sold by restaurants, taverns or similar establishments — including sales for on-premises consumption.
• For off-premises consumption, there is an exception: food (other than sandwiches) is exempt only if it is sold in an unheated state and is of a type commonly sold that way in ordinary food stores.
• Under the regulation (20 NYCRR 527.8(e)(2)), whether food is "heated" turns on the vendor's method of merchandising: if the vendor keeps the food warmer than the surrounding air — using heat lamps, warming trays, ovens, similar units, or by cooking to order — it is selling food in a heated state.
• Because these cookies are always sold warm (kept hot at the counter and in heat sleeves for delivery), they are sold in a heated state, so the off-premises exception does not apply. The cookie sales are taxable whether sold for on-premises or off-premises consumption.

What this means for you

"Heated state" is about how you keep and sell it

New York's exemption for cold, grab-and-go food does not reach food you keep warm to sell. If you use heat lamps, warming trays, heat sleeves, or cook/bake to order so the item is warmer than room temperature when sold, you are selling heated food — and it is taxable, even for take-out and delivery.

Bakeries and prepared-food sellers

Selling your baked goods warm as the selling point puts them on the taxable side. The same items sold cold/unheated (and commonly sold that way in food stores) could fall in the off-premises exemption — the temperature and your merchandising method are what move the line.

Common questions

Q: They're just cookies from a store — why are they taxed like restaurant food?
A: Because they are sold in a heated state. The off-premises exemption only covers food sold unheated; keeping cookies warm (including in delivery heat sleeves) makes them taxable.

Q: Does it matter if the customer takes them to go or has them delivered?
A: No. Sold heated, they are taxable on-premises, to-go, and delivered alike.

Q: Would cold cookies be treated differently?
A: Potentially — food sold in an unheated state, of a type commonly sold that way in food stores, can fall within the off-premises exemption. This opinion turns on the cookies being sold warm.

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)(i) (sales tax on food and drink sold by restaurants and similar establishments)
• 20 NYCRR 527.8 (food and drink; heated vs. unheated state; consumption on/off premises)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_14s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(14)S
Sales Tax
April 27, 2016

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

PETITION NO. S151029B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTED (hereinafter “Petitioner”). The Petitioner sells cookies through retail
stores in New York. The cookies are baked at the stores and kept warm while displayed at the
counters and are delivered to customers in a heated state. Petitioner asks whether its cookie sales
are taxable pursuant to Tax Law § 1105(d)(i).
We conclude that Petitioner’s sales are taxable under Tax Law § 1105(d)(i) since
Petitioner sells the cookies in a heated state.
Facts
Petitioner is in the business of selling cookies. Petitioner’s business model is focused on
selling warm cookies to customers. The cookies are baked at Petitioner’s stores and kept warm
while displayed at the counters. Cookies purchased for delivery are kept warm in heat sleeves
until delivered to customers.
Petitioner sells cookies to three different types of customers: (i) customers who purchase
a few cookies usually for immediate consumption; (ii) customers who purchase cookies in to-go
boxes, usually from four to a few dozen cookies at a time; and (iii) customers who order cookies
to be delivered by Petitioner.
Analysis
Tax Law § 1105(d)(i) provides that a sales tax shall be imposed on: The
receipts 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 …:
(1) in all instances where the sale is for consumption on the premises
where sold;
*

*

*

(3) 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

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Sales Tax
April 27, 2016

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.
Section 527.8 of the Sales and Use Tax Regulations provides further clarification of the
above section of the Tax Law as follows:
(d) Consumption on premises. The phrase for consumption on the premises
shall mean that the food or drink sold may be consumed on the premises
where the vendor conducts his business.
(e) Consumption off premises.
(1) The phrase for consumption off the premises shall mean that the food,
including sandwiches, or drink is intended to be consumed at a place away
from the vendor's premises.
(2) Food or drink in a heated or unheated state. The determination of when
food or drink is sold either in a heated or unheated state must be made
according to the vendor's method of merchandising.
(i) If the vendor attempts to maintain the food at a temperature which is
warmer than the surrounding air temperature by using heating lamps,
warming trays, ovens or similar units, or cooks to order, the vendor is
selling food in a heated state.
(ii) If the vendor sells prepared foods from units maintained at or below
surrounding air temperature, such sales are sales of prepared food in an
unheated state.

Petitioner’s business model is focused on selling warm cookies to customers. Whether
Petitioner sells cookies in small quantities in its stores, in larger quantities in to-go boxes or
delivers cookies to customers, the cookies are always sold in a heated state. Thus, pursuant to
Tax Law § 1105(d) and 20 NYCRR § 527.8, Petitioner’s receipts from the sales of cookies are
taxable, whether sold for on-premises or off-premises consumption.

DATED: April 27, 2016
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

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

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Sales Tax
April 27, 2016

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.