The New York State Department of Taxation and Finance (DTF) recently issued Advisory Opinion TSB-A-24(15)S to clarify whether chocolate-covered marshmallow twists are subject to New York State and local sales tax. The DTF concluded that these specific chocolate-covered marshmallow twists are subject to sales tax. While marshmallows alone may usually be considered food products, their taxability is evident because they are chocolate-covered and would generally be considered candy or confectionery.
Taxability of Chocolate-Covered Marshmallow Twists in New York
The Petitioner purchases chocolate-covered marshmallow twists from a well-known candy and confectionary manufacturer. These oblong treats do not resemble a seasonal character or image, like hearts, bunnies, pumpkins, roses, trees, or Santa Claus.
Furthermore, the Petitioner emphasized that the treats are sold throughout the year, not just during specific seasons, and do not contain any labeling that explicitly advertises them as candy or confectionery. Based on these factors, the Petitioner questioned whether the absence of such descriptors on the packaging, the product's shape, and year-round availability would exempt it from New York State sales tax.
Analysis of Taxability under New York Tax Law
Under New York Tax Law § 1105(a), sales tax is imposed on the receipts from every retail sale of tangible personal property, except where specific exemptions apply. Food and food products are typically sales-tax exempt. However, under Tax Law § 1115(a)(1), candy and confectionery are excluded from tax-exempt food products. The decision hinged on whether the Petitioner’s marshmallow treats were considered candy and confectionary.
The New York State sales tax regulations (20 NYCRR 528.2[a][4]) provide a broad definition of "candy and confectionery," including:
- Chocolate
- Glazed or sugar-coated fruits
- Nuts
- Peanuts
- Popcorn
- Chewing gum
- Mints
- Lollipops
- Fruit-flavored sticks
- Fruit drops
- Licorice
- Pastilles
- Cotton candy
- Marzipan
- Halvah
Any similar product is regarded as candy or confectionery based on average use, as indicated on the label or in advertising. While plain marshmallows are classified as a food product, adding a chocolate coating transforms them into candy or confectionery. This interpretation is supported by Tax Bulletin TB-ST-103, which explains that a product not considered candy or confectionery on its own becomes taxable when dipped or coated in chocolate.
While marketing and packaging are relevant factors in determining taxability, they are not dispositive. Consequently, under Tax Law § 1105(a), receipts from the sales of these chocolate-covered marshmallow twists are subject to New York State and local sales tax.
Contact a New York Tax Professional for Advice
The key takeaway is that the taxability of candy or confectionery will not be solely decided based on shape, packaging, or year-round availability. Instead, the taxability of such items depends on their everyday use. Consulting with a New York tax professional is an excellent decision if you're uncertain how sales tax applies to your products or purchases. A tax professional can provide personalized tax strategy and advise you on sales tax collection.