Are bottled coffee drinks like Starbucks Frappuccino and chocolate drinks like Yoo-Hoo exempt from New York sales tax as food and beverages, or taxable as soft drinks?

Plain-English summary

Wal-Mart Stores East, LP asked the Department to sort out the sales-tax status of two bottled drinks sold for off-premises consumption: Starbucks Frappuccino coffee drink (brewed Starbucks coffee, reduced-fat milk, sugar, cocoa, and other ingredients) and Yoo-Hoo chocolate drink (water, high-fructose corn syrup, whey, sugar, corn syrup solids, cocoa, partially hydrogenated soybean oil, and other ingredients).

New York generally exempts "food, food products, beverages, dietary foods and health supplements" sold for human consumption — but carves several categories back out as taxable, including "soft drinks, sodas and beverages such as are ordinarily dispensed at soda fountains," while specifically preserving the exemption for coffee, tea, and cocoa even within that soft-drink carve-out.

That distinction decided both products:

• Frappuccino is, at bottom, flavored cold coffee. Coffee is squarely within the exempt beverage category, so Frappuccino is exempt from sales tax. (The Department was careful to note this covers only the specific product described — not "other Starbucks Frappuccino products" generically.)
• Yoo-Hoo, despite containing some cocoa, is classified — per the Department's own published food/beverage guidance — as a noncarbonated, flavored soft drink, which does not qualify for the food/beverage exemption. So Yoo-Hoo is taxable.

The key lesson: the soft-drink exception to New York's exempt-food category does not apply across the board to anything containing cocoa or coffee flavoring — coffee (and tea and cocoa as standalone beverage categories) get a specific carve-back into exemption, but a drink that's fundamentally a flavored soft drink doesn't become exempt merely because one of its ingredients is cocoa.

What this means for you

Grocery and convenience retailers

Don't assume all "coffee-flavored" or "chocolate-flavored" bottled beverages get the same tax treatment. What matters is whether the product is fundamentally coffee, tea, or cocoa (exempt) versus a flavored soft drink that merely contains those ingredients (taxable). Check the Department's published beverage guidance (Publication 880) product-by-product rather than assuming a category-wide rule.

Beverage manufacturers and brand owners

If you're introducing a new bottled drink and want clarity on its New York sales-tax status, this ruling shows the Department will look past marketing/flavor descriptions to the product's actual character — coffee-based drinks land differently than cocoa-flavored soft drinks, even when both contain some of the same "exempt" ingredients.

Accountants advising retail/grocery clients

This is a good example of how narrow product-specific rulings can be — the opinion explicitly limits itself to the specific Frappuccino product described and disclaims any conclusion about "other Starbucks Frappuccino products." When auditing a client's beverage tax coding, check each SKU against the Department's actual classification guidance rather than extrapolating from one product to a whole product line.

Common questions

Q: Is bottled coffee drink always exempt from New York sales tax?
A: A drink that is essentially flavored coffee is exempt, following the coffee carve-back within the soft-drink exception. But this opinion applies only to the specific Frappuccino product described — other coffee-adjacent or coffee-flavored products would need their own analysis.

Q: Why is Yoo-Hoo taxable if it contains cocoa?
A: Despite the cocoa content, the Department classifies Yoo-Hoo as a noncarbonated, flavored soft drink based on its overall composition and the Department's own retail food/beverage guidance — the cocoa content alone doesn't convert it into an exempt "cocoa" beverage.

Q: Does this ruling cover all Starbucks-branded drinks?
A: No. The opinion expressly makes no representation about other Starbucks Frappuccino products beyond the one specifically described (with the listed ingredients).

Q: Does this ruling apply to any similar coffee or chocolate drink sold in New York?
A: This is a fact-specific Advisory Opinion binding only on Wal-Mart Stores East, LP as to the exact products described. Other retailers selling the same or similar products can look to this ruling and the Department's published beverage guidance as strong indicators, but it doesn't bind the Department as to them.

Citations and references

• Tax Law § 1105(a) (imposition of sales tax on retail sales)
• Tax Law § 1115(a)(1) (food and beverage exemption; soft drink carve-out; coffee/tea/cocoa preserved)
• 20 NYCRR § 528.2(b)(4) (definition of soft drinks and sodas)
• Taxable and Exempt Foods and Beverages Sold at Retail Food Markets and Similar Establishments, Publication 880 (7/98)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_16s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-08(16)S
Sales Tax
March 19, 2008

Office of Tax Policy Analysis
Taxpayer Guidance Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S071120B

On November 20, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Wal-Mart Stores East, LP, 702 S.W. 8th Street, Bentonville, AR,
72716-0555.
The issue raised by Petitioner, Wal-Mart Stores East, LP, is whether sales of Starbucks
Frappuccino® coffee drink or Yoo-Hoo brand chocolate drink are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner's stores sell both Starbucks Frappuccino® coffee drink and Yoo-Hoo chocolate
drink in bottles for off-premises consumption. A product label supplied by Petitioner for
Starbucks Frappuccino® coffee drink lists as ingredients:
• Brewed Starbucks® coffee (water, coffee);
• reduced fat milk;
• sugar;
• cocoa;
and various other ingredients.
A product label supplied by Petitioner for Yoo-Hoo lists as ingredients:
• water;
• high fructose corn syrup;
• whey (from milk);
• sugar;
• corn syrup solids;
• cocoa (alkali process);
• partially hydrogenated soybean oil;
• sodium caseinate (from milk);
• nonfat dry milk;
• salt;
and various other ingredients.
Applicable law and regulations
Section 1105 of the Tax Law provides, in part:

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TSB-A-08(16)S
Sales Tax
March 19, 2008

On and after June first, nineteen hundred seventy-one, there is hereby imposed
and there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 1115(a) of the Tax Law provides, in part:
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:
(1) Food, food products, beverages, dietary foods and health supplements, sold for
human consumption but not including (i) candy and confectionery, (ii) fruit drinks which
contain less than seventy percent of natural fruit juice, (iii) soft drinks, sodas and
beverages such as are ordinarily dispensed at soda fountains or in connection therewith
(other than coffee, tea and cocoa) and (iv) beer, wine or other alcoholic beverages, all of
which shall be subject to the retail sales and compensating use taxes, whether or not the
item is sold in liquid form. . . .
Section 528.2(b)(4) of the Sales and Use Tax Regulations provides:
Soft drinks and sodas include carbonated and noncarbonated beverages,
carbonated water, dietetic beverages and cocktail and other alcoholic drink mixes.
Opinion
Petitioner's stores sell both Starbucks Frappuccino® coffee drink and Yoo-Hoo brand
chocolate drink in bottles for off-premises consumption. Starbucks Frappuccino® coffee drink
is, essentially, a flavored, cold coffee. Coffee is exempt from sales tax pursuant to section
1115(a)(1) of the Tax Law. Accordingly, sales of Starbucks Frappuccino® coffee drink as
described in this Opinion are exempt from sales tax, as coffee qualifies as an exempt beverage.
It should be noted that this Opinion makes no representation as to other Starbucks Frappuccino
products.
Yoo-Hoo chocolate drink, although it contains some cocoa, is considered for sales tax
purposes to be a noncarbonated, flavored soft drink. See Taxable and Exempt Foods and
Beverages Sold at Retail Food Markets and Similar Establishments, Publication 880 (7/98).
Therefore, Yoo-Hoo chocolate drink does not qualify for the exemption for food and beverages

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TSB-A-08(16)S
Sales Tax
March 19, 2008

provided by section 1115(a)(1) of the Tax Law and sales of Yoo-Hoo are subject to sales tax
under section 1105(a) of the Tax Law.

DATED: March 19, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

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.