NY TSB-A-24(15)S Sales Tax 2024-07-30

Are chocolate-covered marshmallow twists candy or confectionery subject to New York sales tax, even if the package doesn't say 'candy' and they aren't a holiday shape?

Short answer: Taxable. The Department concluded that the chocolate-covered marshmallow twists are candy and/or confectionery subject to New York State and local sales tax under Tax Law § 1105(a). Marshmallows alone are not candy, but a product becomes candy or confectionery when dipped or coated in chocolate. Marketing matters but is not decisive — the product wasn't exempt just because the package never said 'candy' and the shape wasn't festive.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A customer who occasionally buys a chocolate-covered marshmallow twist product asked New York whether it is subject to sales tax. The product is oblong (not a holiday shape like hearts, bunnies, pumpkins, or Santas), is sold year-round, and its packaging never uses the words "candy" or "confectionery." The Department concluded it is taxable candy or confectionery.

New York taxes retail sales of tangible personal property (Tax Law § 1105(a)). Food and food products are generally exempt (Tax Law § 1115(a)(1)), but candy and confectionery are specifically excluded from that exemption (Tax Law § 1115(a)(1)(i)). The regulation defines candy and confectionery broadly — "candy of all types; chocolate (plain or mixed with other products)," glazed/sugar-coated items, gum, mints, marzipan, halvah, "and any similar product regarded as candy or confectionery based on its normal use or as indicated on the label or in the advertising" (20 NYCRR 528.2(a)(4)). Critically, a product that isn't candy by itself becomes candy or confectionery when dipped or coated in chocolate — marshmallows alone are not candy, but chocolate-covered marshmallows are (TB-ST-103).

The petitioner argued the product should be exempt because it isn't shaped like a holiday figure and isn't labeled "candy." The Department said how a product is marketed is relevant but not the sole test. Looking at the product itself and its normal use, it was clearly candy/confectionery, so its receipts are taxable.

What this means for you

Candy, snack, and specialty-food sellers

Coating or dipping an otherwise-exempt food in chocolate can turn it into taxable candy or confectionery in New York. The analysis looks at the product's normal use and character, not just the label — so you can't make a candy exempt by leaving the word "candy" off the package or by avoiding festive shapes.

Marketing and labeling

Labeling and advertising are part of the test (a product "regarded as candy or confectionery based on its normal use or as indicated on the label or in the advertising"), but they aren't the whole test. The Department also weighed the product's own nature — here, the maker's website touted its candy and confectionery line, including this item.

Accountants and tax professionals

The exclusion is in Tax Law § 1115(a)(1)(i), fleshed out by 20 NYCRR 528.2(a)(4) and TB-ST-103's chocolate-coating rule. When advising on borderline snacks, test both the product's normal use and the label/advertising; either can pull an item into "candy or confectionery."

Common questions

Q: Are chocolate-covered marshmallows taxable in New York?
A: In this opinion, yes. Plain marshmallows are not candy, but coating them in chocolate makes the product candy or confectionery, which is excluded from the food exemption and taxable under Tax Law § 1105(a).

Q: The package never says "candy" — doesn't that make it exempt?
A: No. Marketing and labeling are relevant but not decisive. The Department looks at the product itself and its normal use; here it was clearly candy/confectionery regardless of the wording on the package.

Q: What about the shape — it isn't a holiday figure?
A: The shape didn't save it. Being oblong rather than a heart, bunny, pumpkin, or Santa did not change the conclusion that the product is candy or confectionery.

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the reasoning, then check your own facts.

Citations and references

New York Tax Law and regulations:
- Tax Law § 1105(a) — sales tax on retail sales of tangible personal property
- Tax Law § 1115(a)(1) — food and food products exemption
- Tax Law § 1115(a)(1)(i) — candy and confectionery excluded from the food exemption
- 20 NYCRR 528.2(a)(4) — definition of candy and confectionery

Guidance cited:
- TB-ST-103 — a non-candy product becomes candy/confectionery when dipped or coated in chocolate

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-15s.htm
Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-15s.pdf

Original ruling text

Sales Tax
July 30, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (“Petitioner”). Petitioner asks whether certain chocolate-covered marshmallow twists are subject to New York State and local sales tax.

We conclude that the chocolate-covered marshmallow twists petitioner specified in his petition are candy and/or confectionery subject to New York State and local sales tax.

Facts

Petitioner is a customer that occasionally purchases a certain chocolate-covered marshmallow twists product (“product”). Petitioner describes the product as “oblong-shaped” and states that it does “not resemble any object or character, such as hearts, bunnies, pumpkins, or Santas that are produced by other manufacturers and sold around the holidays.” Petitioner also states that, “neither the word candy nor the word confectionery appears on the packaging” of the product, a point verified by the scanned images of the front and back of the product’s packaging that accompany the petition. The product website states that it is well known for the candy and confectionery items it produces, including the product in question. Petitioner asks whether the product is subject to New York State and local sales tax if the product does not resemble any object or character, is sold year-round, and the packaging does not describe the product as either candy or confectionery.

Analysis

Tax Law § 1105(a) imposes sales tax on the receipts from every retail sale of tangible personal property, except as otherwise provided. Food and food products generally are exempt from sales tax imposed on tangible personal property. See Tax Law § 1115(a)(1). However, candy and confectionery are specifically excluded from the types of food products covered by that exemption. See Tax Law § 1115(a)(1)(i) The sales tax regulations provide that “candy and confectionery include, without limitation, candy of all types; chocolate (plain or mixed with other products); glazed or sugar-coated fruits, nuts, peanuts, popcorn or other products; chewing gum; mints; lollypops; fruit flavored sticks; fruit drops; licorice; pastilles; cotton candy; marzipan; halvah 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.” 20 NYCRR 528.2(a)(4). The product in question is chocolate covered marshmallows. While marshmallows by themselves are not considered candy or confectionery, a product that is not candy or confectionery by itself becomes candy or confectionery when it is dipped or coated in chocolate. See TB-ST-103.

Petitioner contends that the product is different from other taxable candy or chocolate covered marshmallows because the product in question is not produced in a decorative or festive shape, nor does the product, as Petitioner describes, “resemble any object or character, such as hearts, bunnies, pumpkins, or Santa’s that are produced by other manufacturers and sold around the holidays.” Petitioner also claims that the product should not be subject to tax because it is not labeled as candy and/or confectionery. How a product is marketed is relevant to, but not the sole determinant of, whether it is considered candy or confectionery. Here, it is clear from the product itself and the normal use of the product that it is candy and/or confectionery. Thus, receipts from the sales of the product are subject to tax pursuant to Tax Law § 1105(a).

DATED: July 30, 2024

Mary Ellen Ladouceur
Principal Attorney

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 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.