Is sushi sold from a supermarket's in-store sushi bar subject to New York sales tax?

Plain-English summary

Price Chopper opened a sushi bar inside one of its New York supermarkets. There's no seating at the sushi bar, the items are sold cold (unheated), and everything is either prepackaged or packaged at the counter when a customer orders. The menu itself labels the items "Ready to eat Meals," lists a fixed price per item rather than a price per pound, and offers packs and platters ranging from a $3.00 two-item order up to a $59.95 Jumbo Sushi Platter. Price Chopper asked whether these sales are subject to sales tax.

The Department said yes, they're taxable. New York generally taxes food and drink sold by restaurants and similar establishments, including sales meant for off-premises consumption -- with a specific exception for food sold in an unheated state that's of the type commonly sold, in the same form and packaging, by ordinary food stores (supermarkets, grocery stores, fish markets, and the like) rather than by places principally selling food that's already prepared and ready to eat. The Department's regulations draw a bright line within that exception: unheated food sold as sandwiches or meals arranged on plates or platters as individual or multiple servings is taxable regardless of how the price is set (per pound vs. per serving), while unheated food commonly sold in bulk by weight, by the dozen, or by volume for off-premises consumption is not.

Price Chopper's sushi packs and platters landed on the taxable side of that line. They're sold as fixed-price packs and platters -- exactly the "meals ready to eat" format the menu itself uses -- not by weight, by the dozen, or by volume the way ordinary grocery-store food is sold. So even though the sushi bar sits inside a supermarket with no seating and everything is served cold, the Department treated the sales the same as restaurant-style prepared meals.

What this means for you

Grocery stores, supermarkets, and specialty food retailers adding prepared-food counters

Adding a sushi bar, salad bar, or similar prepared-food counter inside your store doesn't automatically make its sales exempt "grocery" food, even without seating and even served cold. What matters is whether the items are sold in the same form, packaging, and pricing structure (by weight, dozen, or volume) as ordinary grocery-store food, or instead as ready-to-eat meals, packs, or platters -- which are taxable regardless of temperature or the absence of a dining area.

Retailers pricing prepared food by the item versus by weight

Pricing structure is a signal the Department looks at. Selling sushi (or any unheated prepared food) as fixed-price packs or platters, rather than by weight or volume the way bulk grocery items are sold, points toward taxable "meals ready to eat" treatment.

Accountants and tax professionals

This ruling is a clean application of the § 1105(d)(i)(3) exception and its implementing regulation, 20 NYCRR § 527.8(e)(2): the exception for unheated food commonly sold by food stores turns on form, packaging, and pricing method (bulk/weight/volume vs. individual servings), not on temperature or seating alone.

Common questions

Q: Is all cold food sold in a grocery store exempt from sales tax?
A: No. Cold food is only exempt if it's commonly sold, in the same form and packaging, by weight, the dozen, or volume for off-premises consumption -- like ordinary grocery items. Food sold as ready-to-eat meals, sandwiches, or platters is taxable regardless of temperature.

Q: Does the lack of seating at a food counter make its sales exempt?
A: Not by itself. The Department focused on the form, packaging, and per-item pricing of the sushi packs and platters, not on whether the store provided seating.

Q: Does this ruling apply to my grocery store's prepared-food counter?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. It shows how the Department reasons, but your facts may differ.

Citations and references

Statutes and regulations:

• Tax Law § 1105(d)(i) (tax on food and drink sold by restaurants, taverns, and similar establishments; off-premises consumption exception)
• 20 NYCRR § 527.8(e)(2) (form, condition, quantity, and packaging sold in food stores)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_38s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(38)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S971209D

On December 9, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Price Chopper Operating Co., Inc., P.O. Box
1074, Schenectady, New York 12301.
The issue raised by Petitioner, Price Chopper Operating Co., Inc., is
whether sales of sushi and related items are subject to sales tax when sold from
a sushi counter/bar within a grocery store.
Petitioner submits the following facts as the basis for this advisory
opinion.
Petitioner recently opened a sushi bar within one of its New York
supermarkets. The area of the store where the sushi bar is located does not
provide seating for the purchases to be eaten in the store. The items sold at
the sushi bar are sold in an unheated state.
All items sold are either
prepackaged or are packaged at the counter upon request of the customer.
Petitioner included with its Petition a copy of the menu of the sushi bar which
identifies the items on the menu as "Ready to eat Meals." The menu lists a fixed
price for each item.
The items are not sold by weight.
The items that
Petitioner sells at the sushi bar are sold as a pack or platter at various prices
ranging from $3.00 for certain 2 item orders up to $59.95 for the Jumbo Sushi
Platter.
Applicable Law and Regulations
Section 1105(d)(i) of the Tax Law imposes a tax upon:
The 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...
(1) in all instances where the sale is for consumption on the
premises where sold;
*

*

*

(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 the
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.

-2­
TSB-A-98(38)S
Sales Tax

Section 527.8(e)(2) of the Sales and Use Tax Regulations, provides, in
part:
(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.
(ii) Food sold in an unheated state is taxable when sold as
sandwiches or meals ready to be eaten when arranged on plates or
platters as individual or multiple servings regardless of how the
sales price is arrived at (pound v. serving).
(iii) Food sold in an unheated state is not subject to tax when
commonly sold in food stores in bulk by weight, by the dozen (or
part thereof) or by volume (gallon, quart, etc.) for off-premises
consumption.
Opinion
The items that Petitioner sells at the sushi bar are sold as a pack or
platter at various prices ranging from $3.00 for certain 2 item orders up to
$59.95 for the Jumbo Sushi Platter. The items on the menu are of the type that
are commonly sold for consumption on the premises of a restaurant. It does not
appear that the items on the menu are of the type commonly sold for consumption
off the premises and in the same form and condition, quantities and packaging as
sold in food stores such as supermarkets, grocery stores and fish markets. Thus,
the items sold at the sushi bar are subject to sales tax pursuant to Section
1105(d)(i)(3) of the Tax Law and Section 527.8(e)(2) of the Sales and Use Tax
Regulations.

DATED: June 2, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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