Are Japanese specialty sweets made from beans, flour, rice powder, and sweeteners exempt 'food' in New York, or taxable candy and confectionery?

Plain-English summary

A company planned to sell traditional Japanese specialty sweets in New York by mail and at retail — items like NamaKashi (small baked or steamed cakes of flour, powdered rice, azuki bean paste, and sweeteners), Oshimono (a baked potato-starch and sugar pastry), Shiruko (an azuki-bean-and-sugar powder that makes a sweet soup with hot water), Monaka (azuki bean paste between thin rice wafers), Zangetsu (a ginger rice-powder pancake folded over bean paste), and Yokan/Mizu-Yokan (bean-paste gelatins). It asked whether these are exempt "food" or taxable candy and confectionery.

New York exempts food and food products sold for human consumption under Tax Law § 1115(a)(1), but that exemption expressly does not cover candy and confectionery. The regulation (20 NYCRR § 528.2(a)) defines food broadly — including baked goods, cereal and grain products, and sweetening agents — and defines candy and confectionery by examples like chocolate, glazed or sugar-coated fruits and nuts, chewing gum, mints, marshmallow, marzipan, and halvah, judged by a product's normal use or how it is labeled or advertised.

The Department concluded that these Japanese sweets are food and food products within § 1115(a)(1) and § 528.2(a)(2), and are not candy or confectionery under § 528.2(a)(4). As bean-, rice-, and flour-based cakes, pastries, and gelatins, they fall on the exempt-food side of the line. Their receipts are therefore exempt from sales and use tax.

What this means for you

Specialty grocers and importers

The candy line in New York does not turn on whether something is sweet or eaten as a treat. Bean-, rice-, and flour-based cakes, pastries, and gelatins can be exempt food even when they are sweet, given as gifts, or served on special occasions. What matters is whether the item is really candy/confectionery (chocolate, sugar-coated nuts, gum, mints, marzipan, halvah, and the like) versus a baked or grain/bean-based food product.

Retailers deciding whether to charge tax

Look at the product's composition and how it is normally used, labeled, and advertised — that is the test the regulation applies. A traditional cake or pastry sold as food is exempt; the same shelf can hold taxable confectionery next to exempt baked goods, so classify item by item.

Accountants and tax professionals

The controlling authorities are § 1115(a)(1) and the food/candy definitions in § 528.2(a)(2) and (4). The Department applied the regulation's "normal use / label / advertising" standard and treated these azuki-bean and rice-powder items as exempt food products. Compare the companion 1993 candy-vs-food opinion on chocolate-coated snack bars, where packaging and marketing pushed some products onto the taxable candy side — the classification is fact-specific.

Common questions

Q: Are these Japanese sweets taxable in New York? A: No. The Department ruled they are exempt food and food products under Tax Law § 1115(a)(1), not taxable candy or confectionery.

Q: Why aren't sweet items automatically candy?
A: New York classifies candy and confectionery by examples and by a product's normal use, label, and advertising — chocolate, sugar-coated nuts, gum, mints, marzipan, halvah, and similar items. Bean-, rice-, and flour-based cakes, pastries, and gelatins are treated as food products, not candy.

Q: Does it matter that they are given as gifts or served on special occasions? A: No. The exemption turns on what the product is, not the occasion. These items qualified as exempt food regardless of being traditional gifts.

Q: How should I classify a borderline sweet product? A: Apply the regulation's test — the product's composition and its normal use, label, and advertising. Items that are really candy or confectionery are taxable; genuine baked or grain/bean-based food products are exempt.

Q: Can another seller rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the specific products and facts described. It illustrates the Department's reasoning, but your products or facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(1) (exemption for food and food products for human consumption; candy and confectionery excluded)
• 20 NYCRR § 528.2(a) (definitions of food and food products, and of candy and confectionery)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_25s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (25)S
Sales Tax
April 12, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930119B

On January 19, 1993, a Petition for Advisory Opinion was received from Toraya America Corporation, 300 East 85th Street, #1204, New York, New York 10028. The issue raised by Petitioner, Toraya America Corporation, is whether the sale of food products containing beans, flour, rice powder, sweeteners and other flavors are "food" and, therefore, exempt from the imposition of sales and use tax pursuant to Section 1115(a)(1) of the Tax Law. Petitioner intends to sell several Japanese specialty food products by mail and through retail sales in New York. The following is a list of the products to be sold by Petitioner and their primary ingredients: 1.

NamaKashi: A small baked or steamed cake containing flour, powdered rice, azuki bean paste, sweeteners and baking powder. They are traditionally served to guests on special occasions or given as special gifts.

2.

Oshimono: A baked pastry containing potato starch and wasanbonto sugar.

3.

Shiruko: Powders composed of azuki beans and shirozarato sugar, which, when mixed with hot water, form sweet, steamed soups.

4.

Monaka: Azuki bean paste covered by thin rice wafers. Monaka refers to sweets made of azuki bean filling sandwiched between two thin crisp wafers, and shaped like chrysanthemum blossoms. Azuki bean paste is composed of azuki beans, water and shirozarato sugar.

5.

Zangetsu : Shaped like a half moon, Zangetus are a small ginger flavored pancake made of rice powder folded over azuki bean paste.

6.

Yokan and Mizu-Yokan: Gelatins made of azuki bean paste, water, shirozarato sugar and flavorings. They are wrapped in well-dried bamboo leaves and offered in a gift box.

Section 1115(a) of the Tax Law provides, in part, that: (a) 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:

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TSB-A-93 (25)S
Sales Tax
April 12, 1993
(1) Food, food products, beverages, dietary foods and health supplements, sold for human consumption but not including (i) candy and confectionery ... Section 528.2(a) of the Sales and Use Tax Regulations provides, in part, as follows: (1) Food and food products, except candy and confectionery, when sold for human consumption, are exempt from sales and compensating use tax. (2) The terms "food" and "food products" as used in this section mean edible commodities whether prepared, processed, cooked, raw, canned or in any other form, which are generally regarded as food. This category includes, but is not limited to: meat and meat products milk products cereal and grain products baked goods vegetables and vegetables products fruits and fruit products poultry fish and seafood frozen entrees and desserts

*

jellying agents
fat, oil and shortenings
condiments
spices
sweetening agents
food preservatives
food coloring
frozen dinners
snacks (except candy and
confections)
*

*

(4) 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, marshmallow; marzipan, halvah and similar products regarded as candy or confectionery based on its normal use or as indicated on the label or the advertising thereof. Namagashi, oshimono, shiruko, monaka, zangetsu, yokan and mizu-yokan constitute food and food products within the meaning and intent of Section 1115(a)(1) of the Tax Law and Section 528.2(a)(2) of the Sales and Use Tax Regulations. They are not a candy or confectionery as defined

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TSB-A-93 (25)S
Sales Tax
April 12, 1993
in Section 528.2(a)(4) of said Regulations. Therefore, pursuant to Section 1115(a)(1) of the Tax Law the receipts derived from the sales of said food and food products are exempt from the imposition of sales and use taxes.

DATED: April 12, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.