In the world of sales tax, the devil is often in the details. A recent decision from the New York State Tax Appeals Tribunal (“Tribunal”) serves as an example of how seemingly insignificant details can determine whether a sale is subject to tax. In the Matter of Todd A. Neupert, DTA No. 830368 (Feb. 13, 2025).
The Facts: Petitioner is the owner of a deli that sells a variety of prepared foods, as well as deli meat and other non-prepared items. The New York Division of Taxation audited the deli and determined that Petitioner improperly failed to charge sales tax on “party platters” sold by the deli resulting in a notice of determination for $12,579.62 in sales tax due. The party platters include pre-sliced meats and cheeses served on a deli tray with condiments and other accoutrements, such as lettuce, tomatoes, and banana peppers. Rolls are provided separately in a bag that accompanies the platters, and the customer is charged one price for all the items. Petitioner argued that the platters were not “prepared food” because the platters required assembly by the customer, i.e., making sandwiches.
At the administrative law judge (“ALJ”) level, the ALJ determined that the party platters were prepared foods subject to tax, relying on a Tax Bulletin issued by the Department of Taxation & Finance (“Department”) (TB-ST-283) which states that the sale of “cold cut platters” is taxable.
The Decision: While generally food sales are exempt from tax, if the food is “prepared” by the seller, it is taxable. Thus, the sole issue before the Tribunal was whether the party platters are considered “prepared foods” within the meaning of the sales tax law. The Tribunal found that the party platters were prepared because the Petitioner compiled a number of items in ready-to-eat form either as-is or through some further preparation such as by making a sandwich with the products provided. Petitioner’s preparation included separating the condiments into individual packaging and providing pre-sliced lettuce, tomatoes, and onions.
The Tribunal upheld the ALJ’s decision, rejecting Petitioner’s argument that “the opportunity for additional preparation, such as by making sandwiches…, negates his own preparation or the readily consumable nature of the foods provided.” The Tribunal noted that “[m]any foods that are ready to eat can be augmented in some fashion and so we decline to adopt [Petitioner’s] reasoning.” Following the ALJ’s lead, the Tribunal also relied on Tax Bulletin TB-ST-283, which explicitly states that cold cut platters are considered prepared food and are subject to sales tax.
The Takeaway: A rationale for not taxing unprepared food is to make basic food necessities more affordable. If Petitioner sold sliced cold cuts by weight but did not arrange them on a platter, the sale would not be taxable. Petitioner’s argument here—that the party platters were not prepared foods because the customer would make additional preparations—appears to have some merit, as the Department’s Tax Bulletin relied on by both the ALJ and the Tribunal defines prepared food as “ready to be eaten” and not requiring further preparation. While technically the cold cuts on the platter could be consumed as-is, it was contemplated that customers would prepare sandwiches.
Whether an item is taxable can hinge on seemingly trivial details. While the distinctions can seem absurd at times, they have real financial implications for businesses. Given the complexity and potential for costly mistakes, businesses must be vigilant about the details and should consult with a tax professional to ensure compliance. By staying informed and seeking professional advice, businesses can avoid unexpected tax liabilities. Understanding the rules can make all the difference.