N.Y. Comp. Codes R. & Regs. tit. 20 § 527.8

Current through Register Vol. 46, No. 45, November 2, 2024

Section 527.8 - Sale of food and drink

Tax Law, § 1105(d)

(a)Imposition.

Sales tax is imposed on the receipts, including any cover, minimum, entertainment or other charge, from every sale of beer, wine or other alcoholic beverages and food or drink of any nature sold in or by restaurants, taverns or other establishments in this State or by caterers:

(1) in all instances where the sale is for consumption on the premises where sold;

(2) in those instances where the sale is for consumption off the premises and the vendor (or someone acting on behalf of the vendor) after delivery either serves or assists in serving, cooks, heats or provides services with respect to the food or drink; and

(3) in those instances where the sale is for consumption off the premises of the vendor all sandwiches and other food or drink unless the food or drink is sold in:

(i) an unheated state; and

(ii) the same form and condition, quantities and packaging commonly used by food stores not principally engaged in selling foods prepared and ready to be eaten.

Cross-references:

For charges of roof gardens and cabarets, see section 527.12 of this Part.

For exempt transactions when purchased with food stamps, see section 528.27 of this Title.

(b)Establishments.

The following establishments, as well as other establishments engaged in the sale of food or drink for consumption on or off premises are required to collect the tax:

Automats

Cafes

Cafeterias

Carry-Out Restaurants

Caterers

Dairy Bars

Delicatessens

Diners

Drive-In Restaurants

Fast Food Operators

Hamburg and Hot Dog Stands

Ice Cream Stands

Lunch Bars, Counters and Rooms

Luncheonettes

Mobile Vending Operators

Oyster and Clam Bars

Pizzerias

Restaurants

Sandwich Bars and Shops

Soda Fountains

Taverns, Grills and Bars

Vending Machine Operators

Cross-reference:

For restaurants eligible to accept food stamps for the purchase of meals, see section 528.27 of this Title.

(c)Premises.

The term premises shall mean the total space and facilities in or on which the vendor conducts his business, including but not limited to parking areas for the convenience of in-car consumption, counter space, indoor or outdoor tables, chairs, benches and similar conveniences.

(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 or unheated 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 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.

(iv) Sales of heated and unheated food in combination on plates or as dinners are subject to tax on the total charge.

Example 3:

Cold cuts, salads and bakery products are sold by a restaurant for home consumption. The restaurant charges its customer by the pound for the cold cuts and salad and by the dozen or loaf for the bakery products. Such sales are not taxable.

Example 4:

A supermarket sells and arranges cold cuts on platters for customers. The customer is charged by the pound for the cold cuts. Sales of this type are taxable.

Example 5:

Sandwiches sold through vending machines or other establishments are taxable in all instances.

Example 6:

A take-out establishment sells 10 pieces of chicken, six rolls and one pound of potato salad as a meal for three persons and charges one price for the package. A sale of this type is taxable in full.

(f) Caterers.

(1) Sales by caterers.

(i) All charges by caterers selling food or drink who provide serving or assistance in serving, cooking, heating or other services after delivery are taxable.

(ii) Sales of food or drink by caterers where the caterers merely deliver the items purchased and offer no other services after delivery are deemed to be sales for off-premises consumption and are taxable in accordance with the provisions of subdivision (a) of this section.

(iii) Sales of food or drink by caterers where the caterers deliver the items purchased and arrange the food on platters or place the drink in containers so that food or drink is ready to serve guests are taxable.

Example 1:

A vendor has contracted to cater a wedding party at a private hall. The caterer will furnish food and drink, music, kosher supervision, bartenders, waiters and waitresses, and coat checking all of which will be billed by the caterer. All the charges are taxable.

Example 2:

A vendor sells and delivers cold cuts and salads by the pound without arranging the food on plates, platters or in portions. The vendor provides no other services after delivery. Sales of this type are not taxable because the food is not heated and is in the same form and condition, quantities and packaging commonly used by food stores (see subdivision [a] of this section).

Example 3:

The facts are the same as in Example 2, except the vendor arranges the foods on a platter so that they are ready to be served to guests. Sales of this type are taxable.

(2) Purchases by caterers.

(i) Self-use. Taxable tangible personal property or services used or consumed by a caterer in performing catering services are not purchased for resale as such and are subject to tax. Examples of such taxable property are: tables, tents, chairs, bars, linens, napkins, silverware, glassware, chinaware, serving utensils, table covers, ice used to chill food or drinks before serving, as well as floral arrangements not purchased in accordance with the conditions set forth in subparagraph (v) of this paragraph.

(ii) Food and beverages for resale. Food, such as meat, vegetables, fruit etc., may be purchased exempt from tax by a caterer in accordance with section 528.2 of this Title. Food, such as candy and confections, which is taxable in accordance with section 527.1 of this Part and does not qualify for exemption from tax under section 528.2 of this Title, may be purchased for resale, and thus not subject to tax, provided it is sold to the customer as part of the catering service.

Beverages, such as fruit drinks, soft drinks, soda, cocktail mixers, bottled water, beer, wine and other alcoholic beverages which are taxable in accordance with section 527.1 of this Part and not exempt under section 528.2(b) of this Title may be purchased for resale by caterers provided that such beverages are sold to the customer as part of the catering service. (Ice served in drinks may also be purchased for resale.)

Example 4:

A vendor has contracted to cater an outdoor party at a private residence. The caterer is responsible for making all arrangements for the customer such as providing a tent, tables, chairs, linens, silverware, chinaware, napkins, glassware, portable dance floor, bars, floral arrangements for the tables, a band, serving personnel (who are employees of the caterer), food (roast beef, salad, vegetables and dessert - all prepared by the caterer), alcoholic beverages, soft drinks and valet service. The caterer must pay tax on any rental or purchase of the tent, tables, chairs, linens, silverware, chinaware, napkins, glassware, portable dance floor and bars, as well as any floral arrangements not purchased in accordance with the conditions set forth in subparagraph (v) of this paragraph.

The charges by the band and by the valet service are not taxable to the caterer since they are not services subject to tax. The caterer's purchases of the uncooked meat and the salad, vegetable and dessert components are exempt from tax in accordance with section 528.2 of this Title. The caterer's purchases of alcoholic beverages and soft drinks are purchases for resale, not subject to tax, in accordance with section 527.1(a) of this Title. The caterer's entire charge to the customer is taxable.

(iii) Other property sold to customers.

(a) Tangible personal property which is necessary to contain an item of food or drink for delivery to the customer and which is transferred to the customer with the sale of the food or drink may be purchased for resale by caterers. Such property includes disposable containers, wrappers, cups, dinner plates, trays, platters and the accompanying lids.

(b) Tangible personal property which is not necessary to contain an item of food or drink for delivery to the customer may not be purchased for resale and is taxable when purchased by caterers, regardless of the fact that the item is transferred to the customer with the sale of food or drink. This includes napkins, stirrers, straws, plastic utensils, and other similar items.

Cross-reference:

(See subdivision (d) of section 528.20 of this Title for more information on wrapping and packaging material that may be purchased for resale.)

(iv) Taxable food or drink. Purchases by caterers of prepared food or drink (taxable under subdivision (a) of this section) may not be made for resale and are subject to tax at the time of purchase. However, a caterer may take a credit on its sales tax return for the tax paid on such food. (See subdivision (i) of this section for more information on the purchase of food or drink for resale.)

Example 5:

A caterer has several parties at one time and is unable to prepare all the food for the various groups. The caterer purchases prepared meat platters and prepared hot and cold salads to distribute to the various catered groups. Although the caterer may not purchase the prepared food exempt from tax as a purchase for resale, it may claim a credit when reporting its catered sales on its sales tax return for the tax paid on the food.

(v) Flowers purchased for resale by caterers. Notwithstanding the contrary provisions of this paragraph, caterers may purchase flowers from a florist for resale under the following conditions:

(a) The customer must have the option not to purchase any flowers at all. If the customer wants flowers, the customer must have the option of dealing directly with a florist of the customer's choosing or of purchasing them through the caterer. If the customer chooses its own florist or not to have flowers, the caterer's charge is reduced to reflect that it is not providing flowers.

(b) The customer of the caterer must have complete control over the selection and arrangement of the flowers.

(c) The customer or guests of the customer must have the right to remove the flowers from the caterer's premises.

(d) The caterer must maintain records identifying specifically the customer, florist and flowers that were purchased for resale.

(e) The caterer may not itself use the customer's flowers. Nor may the caterer use one customer's flowers for another customer.

(f) The caterer must collect the sales tax from the customer on the entire charge, including any charge for flowers.

Example 6:

Same facts as in example 4, except that the customer was allowed to select the type of flowers and the florist from which it wished to have the floral arrangements purchased. In addition, the customer had the option to purchase the flowers directly from the florist. The customer allowed one person from each table to take home the flower arrangement at the conclusion of the party. The caterer charged sales tax on the entire bill, including the floral arrangements. While all charges billed to the customer are subject to tax, the caterer may purchase the floral arrangements for resale without paying tax, since all of the conditions have been met.

If the customer purchases flowers directly from a florist and has delivery made to the caterer's premises, the customer must pay the tax directly to the florist.

(g)Sales through vending machines.

(1) Vending machine operations carried on in premises where facilities such as tables, chairs, benches, counters, etc. are provided for customers are considered to be eating establishments selling food or drink for on-premises consumption and sales made through such machines are taxable.

(2) When food or drink is sold through vending machines and no facilities are provided for customers, such sales are deemed to be for off-premises consumption and are taxed accordingly.

(3) With regard to sales of 10 cents or less made through vending machines, see subdivision (h) of this section.

Example 1:

Vending machines located in a hallway dispense hot coffee, sandwiches and pastries. No facilities are provided for customers. Only sales of coffee and sandwiches are taxable.

Example 2:

Vending machines located in a room, containing tables and chairs, dispense potato chips and snacks, sandwiches, coffee and pastries. All sales from the machines are taxable.

(h)Exclusions.

The tax imposed on the sale of food or drink shall not apply to:

(1) Food or drink sold to an airline for consumption in flight.

Example 1:

A restaurant delivers food and drink to an airline. The food and drink are for consumption in flight and are not taxable.

(2) Food or drink sold to a student of a nursery school, kindergarten, elementary or secondary school at a restaurant or cafeteria located on the premises of such schools.

(3) Food or drink, other than alcoholic beverages, sold to an enrolled postsecondary school student, under the terms of a contractual agreement whereby the student does not pay cash when served. In addition, such sales must be made at a restaurant, tavern or other establishment on the premises of the school which is a postsecondary school. Such postsecondary school must be operated by an exempt organization or operated with the sanction of the State of New York.

Example 2:

A student who has paid a semester charge for room and board or board alone has entered into a contractual arrangement for food and drink. The arrangement provides for a fixed number of meals over the duration of the contract, which are served in designated areas. The student is provided with identification which entitles the student to be served meals. This plan qualifies for the exclusion.

Example 3:

A student purchases scrip from the educational institution, to be used in lieu of cash at the various eating establishments. The scrip is transferable, and no identification is required to use it. This plan does not qualify as a contractual obligation.

(4) Food or drink sold through coin-operated vending machines at 10 cents or less, provided the vendor is primarily engaged in making such sales and maintains records satisfactory to the Department of Taxation and Finance. The word primarily used in this paragraph shall mean 50 percent or more of gross receipts from all business operations during a reporting period are attributable to sales of 10 cents or less through vending machines.

(i)Resale.

(1) Any person purchasing food or drink for resale as such is required to pay tax thereon at the time of purchase.

(2) When the food or drink is subsequently resold, the seller is required to collect tax from the purchaser.

(3) The tax paid by the seller may be taken as a credit against the tax which the seller is required to collect and remit on the subsequent sale. The credit is limited to the amount of tax actually paid on the purchase by the seller of the food and drink resold.

Cross reference:

See Part 534 of this Title.

(j)Employee meals.

(1) Food and drink furnished by an employer to employees are not subject to tax if the employer receives no cash (or other consideration) for the food and drink from the employees and the value of the food and drink is not income for the employees under the Federal or State income tax laws.

(2) An employer furnishing food and drink to his employees as provided above is not required to collect or pay a tax on the value assigned to the food and drink. However, the employer is liable for tax on the cost of any taxable components of such food and any taxable drink furnished to employees.

(3) Any charge by an employer to an employee for food or drink is subject to tax, whether paid in cash by the employee or withheld from the employee's wages.

(4) This subdivision shall apply only to meals furnished to employees of restaurants, hotels, motels and similar establishments.

(k)Subsidized employee cafeterias and food service operations.

(1) An employer who by contract or otherwise engages a caterer or food service contractor to provide food and drink or service to employees at the employer's expense is the purchaser of food and drink subject to the sales tax.

Example 1:

Employer E provides food and drink to his employees without charge. E contracts with a food service contractor F to prepare and serve the food and drink for a fee to be paid by E. The fee paid by E is subject to tax as a receipt from the sale of food and drink.

(2) Sales of food, drink or service to employees through a cafeteria on an employer's premises are subject to the sales tax.

Example 2:

Employer E maintains a cafeteria or restaurant on his premises for the purpose of selling food and drink to his employees. The sale of the food and drink to the employees is taxable.

(3) When the employer subsidizes the caterer or food service contractor, such subsidy, regardless of whether it is called a management fee, guarantee of profit or some other designation, is taxed as a receipt from the sale of food and drink.

Example 3:

Caterer C agrees to charge employer E's employees a scheduled amount for each item of food and drink it sells to them. E agrees to pay caterer C an amount, in addition to the employees' payments, which would guarantee a 12 1/2 percent profit from the sales to the employees. The amount paid by E to the caterer is a taxable receipt from the sale of food and drink.

Example 4:

Employer E enters into an agreement with caterer C. The agreement provides that C prepare, serve and sell food and drink to E's employees at a price mutually agreed to and in addition, E will pay a subsidy to C for operating the facility. The subsidy will be such an amount to allow C to make a profit on its sales of food and drink to the employees. However, if C's profits from the sale of food and drink exceed a set figure, C and E will share the excess profits in an agreed apportionment. Irrespective of the profit sharing agreement, the subsidy paid by E is considered to be a receipt from the sale of food and drink.

(4) If a subsidy is paid by an employer in addition to a specified amount paid by the employee, both amounts are taxed as the receipt from the sale of food and drink.

Example 5:

Employer E will pay 50 cents to a caterer for each sale of food and drink to E's employees. E's employees will pay any amount due which exceeds the 50 cents paid by E. Both the amount paid by the employee and the 50 cents paid by E are taxable receipts from the sale of food and drink.

(5) The caterer or food service contractor is a vendor required to collect the tax on receipts from either the employee, employer or both.

(l)Gratuities and service charges.

Any charge, made to a customer, is taxable as a receipt from the sale of food or drink, unless:

(1) the charge is separately stated on the bill or invoice given to the customer;

(2) the charge is specifically designated as a gratuity; and

(3) all such monies received are paid over in total to employees.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 527.8