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Food ready to eat on plate? It's taxable

ALBANY -- Order your bagel to go. It might lower your tax liability.

After faulting Bruegger's Bagel Bakery franchises in a 2010 audit for failing to collect sales tax on sliced bagels -- the cleaving was deemed to be a form of preparation that made the bagel more ready-to-eat and therefore subject to sales tax -- the state Department of Taxation and Finance has issued a series of interpretive bulletins for retailers that may prompt the state's largest bagel-monger to once again shift its practice.

It's the first time New York's tax collectors have given comprehensive guidance about whether particular foods and beverages are taxable.

And the bagel verdict? Focus on the plate, not the slice.

"Food that is prepared and arranged on a plate or platter by the seller, and that is ready to be eaten is taxable," says one bulletin. "It doesn't matter whether the food is sold to be eaten at the store or another place, or whether it's served hot or cold. Ready to be eaten means that the food is placed on an individual plate or container, or on a serving platter, and doesn't require any more preparation."

"What a difference a year makes," said a frustrated Ken Greene, founder of Flour City Bagels and the owner of 33 Bruegger's franchises, including those in the Capital Region. His stores now collect tax on all sliced bagels.

The bulletin says bagels sliced or unsliced are not subject to sales tax "in quantity;" taxation and finance spokeswoman Susan Burns clarified that a single bagel, sliced or unsliced, would not be taxed if it were served for off-premises consumption -- in a bag -- even if a customer who said they wanted it to-go then sat down to eat it.

Plate or no, adding cream cheese, lox, butter, onions, tomatoes or peanut butter all subject a bagel to sales tax, Burns added. Most retailers, including Bruegger's, have already been making the distinction.

"But what happens when a person buys a half-dozen sliced bagels, a container of cheese to go and then sits down to eat?" Greene asked.

Tax-free, Burns said.

"I am more confused now," Greene said.

The state has a 4 percent sales tax, and most counties tack on another three or four cents per dollar. Generally, groceries are tax-exempt but ready-to-eat foods are not.

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