Sales, Use and International Tax Activity Update - October 2009

New York — Fruit Snacks – Food or Candy?

Facts

The New York Tax Commissioner issued an Advisory Opinion on whether “Fruit Snacks,” “Fruit Gushers,” and “Craisans” are subject to sales tax.  The Petitioner operates a supermarket chain and sells these three products.

Analysis

N.Y. Tax Law Section 1105(a) imposes sales receipts from the retail sale of tangible personal property. N.Y. Tax Law Section 1115(a)(1) in part exempts from sales tax food and food products.

N.Y. Regulation Section 528.2(a)(2) of the Sales and Use Tax Regulations provides that “food and food products” means edible commodities whether prepared, processed, cooked, raw, canned or in any other form generally regarded as food. A list of food and food products includes, among other things, condiments, sweetening agents, and snacks (except candy and confections).

Regulation Section 528.2(a)(4) provides that “Candy and confectionery include, without limitation, candy of all types; chocolate (plain or mixed with other products); glazed or sugar-coated fruits, nuts, peanuts, popcorn, or other products and any similar product regarded as candy or confectionery based on its normal use or as indicated on the label or in advertising thereof.”

The statute lacks clarity as far as the taxable status of food products that may be characterized as candy or confectionery. The law does not define these terms. The regulations in part define “candy” as “candy of all types.” It is important that there be reasonable and readily discernable standards for categorizing food products as candy or confectionery. The primary focus in determining taxable status should be on what the product is (i.e., what it consists of) and how the product fits within the statutory and regulatory scheme.

Ruling

The Tax Commissioner has concluded that “Fruit Snacks” and “Fruit Gushers” are substantially similar in content to “Fruit Rollups,” which have been deemed exempt from tax. Therefore, these two products are not subject to sales tax.

The Tax Commissioner also concluded that “Craisans” are not a candy or confectionary subject to sales tax. They accepted the Petitioner’s argument that the process of infusing the dried cranberries with a sugar solution is a process distinct from merely coating an otherwise exempt food item with sugar or chocolate. 

The full Advisory opinion can be viewed on the New York State Department of Taxation and Finance Web site.

 

 

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