New York Clarifies Sales Tax Exemption for Food: Artificially Sweetened Chocolate Product Is Subject to Sales Tax

May 21st, 2012

The New York Department of Taxation and Finance (DTF) recently released an advisory opinion explaining that sales of an artificially sweetened chocolate product marketed as promoting a healthy lifestyle are subject to sales tax. N.Y. Advisory Op. of the Commr. of Taxn. & Fin. TSB-A- 12(9)S (May 3, 2012).

The taxpayer that petitioned the DTF for the ruling is a network marketing company that sells a chocolate product, which is sold in wrapped pieces. The company markets the product as promoting a healthy weight and healthy lifestyle. The product contains no natural sugar, but it does contain an artificial sweetener, glycemic xylitol. The taxpayer asked whether its sales of this product are subject to sales tax.

New York exempts food and food products from sales tax, but the exemption for food specifically excludes "candy and confectionery." N.Y. Tax Law sec. 1115(a)(1). According to New York's sales tax regulations, "[c]andy and confectionery include, without limitation, candy of all types; chocolate (plain or mixed with other products); . . . any similar product regarded as candy or confectionery based on its normal use or as indicated on the label or in advertising thereof." 20 N.Y. Comp. Codes R. & Regs. 528.2 (a)(4). The DTF reasoned that the chocolate product is sweetened chocolate sold in wrapped pieces, so it qualifies as a candy or confectionery product and, therefore, is subject to sales tax.