United States

New York: Warm Cookies are Taxable; Working Them Off is Tax-Free

Jun 13, 2016
From KPMG TaxWatch

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In a recent advisory opinion, the New York Department of Taxation and Finance concluded that sales of warm cookies were subject to sales tax, regardless of the number of cookies purchased or whether the cookies were delivered to the customer. At its stores, the taxpayer baked and sold cookies, which were kept warm at all times pending sale. Some of the taxpayer’s customers purchased a few cookies at a time, others purchased larger quantities to go, and still others had cookies delivered. Under New York law, food sold for on-the-premises consumption and food sold for off-the-premises consumption is subject to sales tax. There is an exemption if the food (except for sandwiches) is served in an “unheated state” and is the type of food commonly sold for consumption off the premises and is similar in type to food items sold at stores that do not specialize is selling food for on-premises consumption. Because the taxpayer’s cookies were always sold warm (i.e., in a heated state), the Department concluded they were always taxable.

In a separate advisory opinion issued a day earlier, the Department concluded fees for “high intensity interval training” fitness classes and “weight loss challenges” were not subject to New York State sales tax. The taxpayer at issue offered high intensity interval training fitness classes, mostly for clients wanting to improve their fitness levels. The classes were taught at a studio, and various types of equipment (treadmills, stationary bikes, etc.) were used in the classes. Clients had no opportunity to use the equipment outside the class setting. For those clients for whom weight loss was a goal, the taxpayer offered an optional weight loss challenge for an additional fee. The winner of the challenge was the client that had the greatest body fat reduction over the period of the class. Under New York law, sales tax is imposed on receipts from admission charges to a place of amusement and dues paid to an athletic club. With little need for explanation, the Department concluded that the taxpayer’s “class entry fees and weight loss challenge fees do not constitute charges for admission to a place of amusement.” In addition, the Department concluded that the fees were not dues paid to an athletic club because the taxpayer’s business was not organized or operated as a “club.” However, New York City sales tax applied to the class entry and weight loss challenge fees, as the City imposes its sales tax on the sale of services by “weight control salons.” The Department concluded that under the City administrative code, the taxpayer’s business qualified as a weight control salon. For more information on these advisory opinions, please contact Judy Cheng at 212-872-3530.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.