Which of a mall cinnamon-roll shop's items are taxable, and does having tables or a food court change the answer?

Plain-English summary

Great Bons, Inc. operates several "Cinnabons" shops in shopping malls and asked which of its food and beverage sales are taxable — and whether it matters if the mall has a food court or the shop has tables. It sells fresh-baked cinnamon rolls (kept warm), pre-packaged boxes of rolls (refrigerated), milk, juice, bottled water, soft drinks, and cups of coffee. Some shops have tables; others don't. Some malls have food courts, but Great Bons' shops are not located in the food court, pay no food-court common charges, and (in the no-table shops) have no place to eat.

The Department's answers, under Tax Law §§ 1105(d) and 1115(a)(2) and Regulation § 527.8:

• Heated rolls and by-the-cup drinks are always taxable. Fresh-baked cinnamon rolls in a heated state, bottled water, soft drinks, and cups of coffee are taxable whether sold for on- or off-premises consumption. (The § 1115(a)(2) exemption is for water delivered through mains or pipes, not bottled water; and all beverages sold by the cup are taxable.)
• Boxed unheated rolls are exempt to go. Pre-packaged (unheated) boxes of rolls, sold in the same form/packaging as a food store would, are not taxable — unless sold for on-premises consumption.
• Milk and juice to go are exempt; eat-in is taxable. Cartons of milk and juice sold in ordinary food-store packaging for off-premises consumption are not taxable; but when sold for on-premises consumption at a shop that has tables, they are taxable.
• A food court elsewhere in the mall doesn't make sales "on-premises." Where Great Bons' shop is not in the food court, pays no food-court common charges, and has no tables, the sale isn't treated as on-premises just because the mall has a food court.

What this means for you

Heated food and by-the-cup drinks: collect tax

If you sell food kept warm (heated) or drinks by the cup (coffee, fountain soda), those are taxable regardless of whether the customer eats in or takes out. Bottled water and soft drinks are taxable too.

Packaged, unheated, food-store-style items can be tax-free to go

Items sold unheated in the same form and packaging a grocery store would use — boxed rolls, cartoned milk and juice — are generally not taxable when taken out. Selling them to eat in flips them to taxable.

Tables (not the mall's food court) drive "on-premises"

Whether a sale is on-premises turns on your facilities. Having tables makes eat-in sales taxable. A food court elsewhere in the mall doesn't count against you if your shop isn't in it, you pay no food-court common charges, and you have no tables.

Accountants and tax professionals

The opinion applies § 527.8's heated/unheated and on/off-premises tests plus Notice ST-151.9's milk/juice and by-the-cup rules; the food-court analysis keys "premises" to the vendor's own eating facilities and cost responsibility.

Common questions

Q: Are hot cinnamon rolls taxable if the customer takes them to go?
A: Yes. Heated food is taxable whether for on- or off-premises consumption.

Q: Are boxed (refrigerated) rolls taxable?
A: Not when sold unheated in food-store packaging for off-premises consumption. They become taxable if sold to eat in.

Q: Is bottled water taxable? Milk and juice?
A: Bottled water, soft drinks, and by-the-cup drinks are taxable. Cartons of milk and juice in food-store form are exempt to go, but taxable if sold to eat in at a shop with tables.

Q: Does the mall having a food court make my sales taxable?
A: No — as long as your shop isn't located in the food court, pays no food-court common charges, and has no tables of its own.

Citations and references

Statutes, regulations, and notices:

• Tax Law § 1105(d) (tax on food and drink sold by restaurants, taverns, or other establishments; on-premises and certain off-premises sales)
• Tax Law § 1115(a)(2) (exemption for water delivered through mains or pipes)
• Sales and Use Tax Regulations § 527.8 (consumption on/off premises; heated vs. unheated; food-store form/condition/packaging)
• Department of Taxation and Finance Notice ST-151.9 (6/71) and Notice ST-151.9 (3/73 Supplement) (milk and natural fruit juices in food-store form not taxable; all beverages sold by the cup taxable)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_25s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-92 (25)S
Sales Tax
March 19, 1992

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911216A

On December 16, 1991, a Petition for Advisory Opinion was received from Great Bons, Inc.,
72 West Lane, Bayshore, New York 11779.
The issue raised by Petitioner, Great Bons, Inc., is whether the sale of certain food and
beverages in stores located in shopping malls in which food courts may or may not be present are
subject to sales and use taxes.
Petitioner owns and operates several "Cinnabons" stores. "Cinnabons" is a national franchise
which sells baked cinnamon rolls, coffee, bottled water, juice, milk and soft drinks in stores
generally located in shopping malls.
Petitioner presently operates in shopping malls which have "food courts" located within the
mall. Petitioner does not have any stores located in the "food courts," nor does Petitioner pay any
food court common area charges. Petitioner also plans to open stores in shopping malls which have
no "food courts."
Petitioner has stores in which tables are available for customers to eat at, as well as stores
which have no tables or any other facilities for customers to eat.
Petitioner sells fresh baked cinnamon rolls (kept warm), pre-package boxes of cinnamon rolls
(kept refrigerated), milk, juice, bottled water, soft drinks, and cups of coffee. Items are either sold
separately or in conjunction with each other, with the exception of milk and juice which are not sold
in conjunction with other items. Moreover, the milk and juice are sold in cartons which are in the
same form as that sold by food stores which are not principally engaged in selling food prepared and
ready to be eaten.
When a customer purchases any item for on premise consumption, the cinnamon roll is
placed on a plate. If a customer purchases an item for off premise consumption, the items are placed
in a bag or in a to go carry box. Prepackaged cinnamon rolls are sold only for off premise
consumption.
Section 1105(d) of the Tax Law imposes a tax on the receipts from ". . .every sale of food
and drink. . .when sold in or by restaurants, taverns or other establishments. . . .
(1) in all instances where the sale is for consumption on the premises where
sold;
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(3) in those instances where the sale 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

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TSB-A-92 (25)S
Sales Tax
March 19, 1992
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 further explains, in pertinent part, 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. 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.
(1) Food or drink in a heated or unheated state. The determination of when
food or drink is sold either in a heated 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.
Example 1:

A supermarket sells barbecued chicken hot from a rotisserie
to be taken home and eaten. This is a taxable sale of heated
food.

Example 2:

A food store sells potato salad by the pound and also sells hot
pastrami by the pound for home consumption. The potato
salad is not taxable but the pastrami is subject to tax.

(2) form, condition, quantity and packaging sold in food stores. (i)
The term food stores shall mean any establishment which is
principally engaged in selling food or drink which is not prepared and
ready to be eaten. Supermarkets, grocery stores, fish markets,
produce markets, bakeries and meat markets are examples of the
types of establishments considered to be food stores. When a
department within food stores makes sales of food or drink which are
subject to tax, it must collect the tax.
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TSB-A-92 (25)S
Sales Tax
March 19, 1992
(iv) Sales of heated and unheated food in combination on plates or as dinners
are subject to tax on the total charge.
Section 1115(a)(2) of the Tax Law exempts from sales tax the receipts from the sale of water,
when delivered to the consumer through mains or pipes.
Department of Taxation and Finance Notice ST-151.9 (6/71) and Notice ST-151.9 (3/73
Supplement), relating to the sale of food or drink for on or off premises consumption, provides, in
part, that natural fruit juices and milk will not be taxable when they are of the same type, and are sold
in the same form, condition, quantities and packaging as they are commonly sold in grocery stores.
However, all beverages sold by cup are subject to tax.
Accordingly, pursuant to Sections 1105(d) and 1115(a)(2) of the Tax Law, Section 527.8 of
the Sales and Use Tax Regulations, Notice ST-151.9 (6/71) and Notice ST-151.9 (3/73 Supplement)
the receipts from the sale of fresh baked cinnamon rolls in a heated state, bottled water, soft drinks
and cups of coffee are subject to sales and use taxes whether sold for on or off premises
consumption.
Pursuant to Section 1105(d) of the Tax Law and Section 527.8 of the Sales and Use Tax
Regulations the receipts from the sale of pre-packaged boxes of cinnamon rolls in an unheated state
which are in the same form, condition, quantity and packaging as rolls sold in a food store are not
subject to sales and use taxes provided that they are not sold for on premises consumption.
The receipts from the sale of cartons of milk and juice, for off premises consumption, are not
subject to sales and use taxes pursuant to Section 1105(d) of the Tax Law, Section 527.8 of the Sales
and Use Tax Regulations, Notice ST-151.9 (6/71) and Notice ST-151.9 (3/73 Supplement) since they
are sold in the same form as that sold by food stores which are not principally engaged in selling
food prepared and ready to be eaten. However, where said cartons of milk and juice are sold for on
premises consumption in stores in which Petitioner has tables for customers to eat at, the receipts
from the sale of such items are subject to sales tax. The sale of said items will not be considered to
be sold for on premises consumption in those malls having food courts where Petitioner's store is
not located in the mall food court area, Petitioner is not liable for food court common charges and
Petitioner does not have facilities for the customer to eat at in its store.

DATED: March 19, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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