Is cook-to-order pizza that is sold and eaten unheated taxable, and does cooking it to order make it 'sold in a heated state'?

Plain-English summary

This is a modified advisory opinion that supplements the opinion issued to Robert H. Matheis, doing business as Pizza Oven Baking Co., on November 4, 1985 (TSB-A-85(60)S), by adding a discussion of an issue the original did not address. Matheis's pizza is unusual in that it is sold and eaten in an unheated state. The added question: are his unheated pizzas, sold for off-premises consumption, taxable when he bakes them to order after a customer asks?

The Department's answers:

• The food-store exception can apply. Under § 1105(d)(i), food sold by restaurants and similar establishments for off-premises consumption is taxable except where food (other than sandwiches) is (A) sold in an unheated state and (B) of a type commonly sold for off-premises consumption, in the same form, condition, quantities and packaging, in food stores that are not principally selling prepared, ready-to-eat food.
• Ordered or not makes no difference. The original opinion's conclusion — that the unheated pizza is not taxable if Matheis can establish it is commonly sold in that same form in food stores such as bakeries — applies equally to pizzas baked to order and pizzas not baked to a specific order, because § 1105(d)(i) draws no distinction between ordered and unordered food.
• Cooking to order does not, by itself, make it "heated." Under 20 NYCRR 527.8(e)(1), whether food is sold heated or unheated depends on the vendor's method of merchandising: food kept warmer than the surrounding air (heat lamps, warming trays, ovens) or cooked to order is sold "heated," while food sold from units at or below air temperature is "unheated." That rule treats cook-to-order food as heated only when the vendor also sells it warmer than the surrounding air. Here, Matheis cooks to order but sells the pizza at room temperature, so § 527.8(e)(1)(i) does not apply — his pizzas are not deemed sold in a heated state merely because they are cooked to order.
• Bottom line. The unheated pizza sold for off-premises consumption is taxable unless Matheis can establish that it is of a type commonly sold, in the same form, condition, quantity and packaging, in food stores such as bakeries.

What this means for you

"Cooked to order" is not automatically "sold heated." New York's test is how you merchandise the food. If you cook to order but then sell the item at room temperature — not held above the surrounding air temperature — it is treated as sold unheated.

The unheated exception has two prongs, and you must prove the second. Selling food unheated is not enough. You also have to show the item is of a type commonly sold, in the same form and packaging, by ordinary food stores like bakeries — not just by prepared-food sellers. The burden is on the vendor.

Order status doesn't change the food's tax character. Whether a customer preorders the item or buys one already made, the § 1105(d)(i) analysis is the same. Don't rely on "made to order" to shift the result.

Keep evidence of comparable food-store sales. Because the exception turns on what bakeries and similar stores commonly sell, documentation that your unheated product matches such offerings in form, quantity and packaging is what supports treating it as non-taxable.

Common questions

Q: We bake the pizza only after a customer orders it. Is it automatically taxable as "heated" food?
A: No. Cooking to order makes food "heated" only if you also sell it warmer than the surrounding air. If you sell it at room temperature, it is not deemed sold in a heated state just because it was cooked to order.

Q: Does selling it unheated make it tax-free?
A: Only if you also meet the second prong: the item must be of a type commonly sold, in the same form, condition, quantity and packaging, in food stores such as bakeries that are not principally selling ready-to-eat food.

Q: Does it matter whether the pizza was preordered or already made?
A: No. Section 1105(d)(i) draws no distinction between ordered and unordered food, so the same test applies either way.

Q: Who has to prove the food-store exception?
A: The vendor. The pizza is taxable unless the seller can establish that it is commonly sold unheated, in the same form and packaging, in food stores like bakeries.

Citations and references

Statute:

• Tax Law § 1105(d)(i) — taxes food and drink sold by restaurants and similar establishments, with an exception for unheated food commonly sold in the same form in ordinary food stores

Regulation:

• 20 NYCRR 527.8(e)(1) — heated vs. unheated is determined by the vendor's method of merchandising; cook-to-order food is "heated" only when also sold above surrounding air temperature

Related opinion:

• TSB-A-85(60)S (Nov. 4, 1985) — the original advisory opinion to the same petitioner that this opinion modifies

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_60_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(60.1)S
Sales Tax
July 3, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
MODIFIED ADVISORY OPINION

PETITION NO. S841115B

On November 4, 1985, an Advisory Opinion was issued to Robert H. Matheis dba Pizza
Oven Baking Co., 54 Vine Street, Lockport, New York 14094. Such Advisory Opinion is modified
by appending thereto the following discussion of an issue not treated therein.
The issue raised is whether Petitioner's pizzas, sold in an unheated state for off premises
consumption, are subject to the sales and use tax imposed under Articles 28 and 29 of the Tax Law
when such Pizzas are baked by Petitioner after receiving orders for such pizzas from Petitioner's
customers. It is noted that Petitioner's pizza is somewhat unusual in that it is sold and eaten in an
unheated state.
Section 1105(d)(i) of the Tax Law imposes a tax upon "[T]he 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, ... where the sales is 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 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 food prepared and ready to be eaten."
The Advisory Opinion issued to Petitioner on November 4, 1985 concluded that" ... if
Petitioner can establish that the unheated pizza sold in his establishment for off premises
consumption is of a type commonly sold for consumption off the premises and in the same form and
condition, quantity and packaging in food stores such as bakeries, then such unheated pizza will not
be subject to tax."
This conclusion is equally applicable to pizzas baked by Petitioner after receiving orders for
such pizzas and to pizzas which are not baked pursuant to a specific order inasmuch as section
1105(d)(i) of the Tax Law makes no distinction between ordered and unordered food.
It is noted that regulation section 527.8(e)(1) provides, in part:
"(1) 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.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(60.1)S
Sales Tax
July 3, 1986

(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." (emphasis added).
Thus, if a vendor cooks food to order and sells the food at a temperature which is warmer
than the surrounding air temperature, such food is considered to be sold in a heated state even if the
vendor makes no effort to maintain the food at a temperature which is warmer than the surrounding
air temperature. However, in the instant case, Petitioner cooks pizzas to order and sells them at room
temperature. Accordingly, the provisions of regulation section 527.8(e)(1)(i) do not apply to
Petitioner. His pizzas are not deemed to be sold in a heated state merely because they are cooked to
order.
It bears repeating that the unheated pizza sold by Petitioner in his establishment for off
premises consumption is subject to tax unless Petitioner can establish that such pizza is of a type
commonly sold for consumption off the premises and in the same form and condition, quantity and
packaging in food stores such as bakeries.

DATED: July 3, 1986

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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