In a rare demonstration of clarity New York State's Department of Taxation and Finance recently released an interpretive bulletin for restaurants, bars, taverns, cafes and other fodd service establishments which they hope will clarify when sales tax is to be charged.
The release of this bulletin follows New York's 2010 audit of Bruegger's Bagel Bakery Franchises for their failure to remit sales tax on "ready-to-eat" food. The rule is that "ready-to-eat" food is subject to sales tax, but never before was there a clear definition of what "ready-to-eat" meant.
According to the bulletin, "food that is prepared and arranged on a plate or platter by the seller and that is ready to be eaten is taxable." In other words, it does not matter whether the food is intended to be consumed at the store or at home, nor does it matter whether the food is served hot or cold. What matters is whether the food is placed on an individual plate or container and whether it requires any additional preparation prior to consumption.
So, how does this impact you? Well, if you want to pay more for that morning bagel, ask the bakery to cut, toast and place it on a plate ready to eat. But, if you would rather avoid paying the additional sales tax, request a side of cream cheese and tell them that you'll spread it yourself.
If you operate a Restaurant, Bar, Tavern, Cafe or Nightclub in the City of New York contact the DiPasquale Law Group for a free consultation on your tax issues. We have helped countless food and liquor establishments in Manhattan, Brooklyn, Queens and the Bronx and would love to help you.