Are doughnuts sold in packages of 8-12 for off-premises consumption from a mobile trailer subject to New York's prepared-food sales tax?

Plain-English summary

John P. Hoban, doing business as "The Donut Man" in Pulteney, New York, produces and sells doughnuts in packages of 8-12 from a small 7' x 8' trailer that is moved from area to area. There is no provision for on-premises consumption. He asked whether his doughnut sales are subject to New York's prepared-food sales tax.

The Department ruled the receipts are not subject to the § 1105(d) food tax.

• Tax Law § 1105(d) taxes receipts from sales of food and drink "sold in or by restaurants, taverns or other establishments" (and by caterers) for off-premises consumption — 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 other than those principally engaged in selling foods prepared and ready to be eaten.
• Hoban's doughnuts satisfy all of this: they are sold (1) for off-premises consumption, (2) in an unheated state, and (3) are of a type commonly sold that way in ordinary food stores.
• Therefore the receipts from his sales are not subject to the § 1105(d) tax.

What this means for you

Grocery-style food, sold cold to go, escapes the prepared-food tax — even from a food stand. New York's § 1105(d) tax targets food sold like restaurant food. But when the item is sold unheated, for off-premises consumption, and is the kind of thing an ordinary grocery sells in the same packaging, it falls into the grocery exception and isn't taxed under § 1105(d) — regardless of the small, mobile nature of the seller.

The three conditions all have to line up. Sell the same doughnuts heated, or provide seating for on-premises eating, and the analysis can change. And note the built-in carve-out: sandwiches are excluded from this exception and remain taxable.

Packaging and quantity matter. Selling in multi-count packages (here 8-12), the way a grocery would, supports the exception. Single servings sold to be eaten on the spot look more like taxable restaurant food.

Common questions

Q: I sell doughnuts to go from a trailer — do I charge sales tax?
A: Not under § 1105(d), on these facts. Because the doughnuts are sold unheated, for off-premises consumption, in the packaging an ordinary food store uses, they fall within the grocery-type exception and the receipts aren't subject to the prepared-food tax.

Q: Does it matter that I have no seating?
A: Yes, it helps. Selling only for off-premises consumption (no on-premises eating) is one of the conditions for the exception. Providing seating for on-premises consumption would point toward taxable restaurant-style sales.

Q: Would heated doughnuts or sandwiches be treated the same?
A: No. The exception requires the food be sold unheated, and it expressly does not apply to sandwiches — those remain taxable under § 1105(d).

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(d) — taxes receipts from food and drink sold by restaurants, taverns, other establishments and caterers, with an exception for food (other than sandwiches) sold unheated and of a type commonly sold for off-premises consumption in ordinary food stores

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_45s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-H-81(45)S
Sales Tax
March 4, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801121D

On November 21, 1980, a Petition for Advisory Opinion was received from Mr,
John P. Hoban (The Donut Man), P.O. Box 28, Cross Street, Pulteney, New York
14874.
The issue raised is whether or not receipts from the sale of doughnuts sold
in packages containing 8-12 doughnuts are subject to the sales tax imposed under
Article 28 of the Tax Law.
Petitioner owns and operates a business known as "The Donut Man" which
produces and sells doughnuts in packages containing 8-12 doughnuts. The business
is located in a 7' x 8' trailer which is moved from one area to another depending
on the market available for the product. There are no provisions for on premises
consumption.
Section 1105(d) of the Tax Law, contained in Article 28, imposes a tax on
"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, or by caterers. . .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 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."
Inasmuch as the Petitioner (1) sells his product for off-premise
consumption, (2) sells his product in an unheated state and (3) sells a product
"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 foods prepared and ready to be
eaten," the receipts from Petitioner's sales are not subject to the sales tax
imposed on the sale of food under Article 28 of the Tax Law.

DATED: February 18,1981

TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR