If you think making lunch for the family is challenging, try getting the sales tax on sandwiches right.
At lunchtime, if given a choice, the four members of my family would select four different sandwiches: an open-faced toasted rye with cold cheese and apples slices for me; a French dip served warm for my husband; a turkey sandwich served whole for Thing 1; and a PB&J sliced diagonally for Thing 2 — unless both kids want wraps. And wouldn’t you know it? Each preference could impact the taxability of the sandwich.
Warm vs. cold
In Texas, sandwiches are considered a prepared food and taxable. However, the Texas Comptroller specifically calls out frozen sandwiches as exempt. If a customer buys a frozen sandwich and uses an in-store microwave to heat it, the sale would be exempt. But if the seller heats the frozen sandwich for the customer, the sale would be taxable.
California taxes “all sales of hot prepared foods unless otherwise exempt” and considers grilled sandwiches and sandwiches dipped in hot gravy (e.g., my husband’s French dip) to be hot prepared foods. However, a toasted sandwich that’s intended to be consumed cold (e.g., my toasted rye with cheese and apples) is not a sale of a hot prepared food so would generally be exempt. Unless, of course, it was sold to be consumed at a table (see below).
Seated vs. standing
Sandwiches “sold in a form for consumption at tables, chairs, or counters, or from trays, glasses, dishes, or other tableware provided by the retailer” are subject to California sales tax. But the definition of the provided seating can sometimes get a little tricky. Thankfully, the state dutifully explains that a “passenger’s seat aboard a train, or a spectator’s seat at a game, show, or similar event is not a ‘chair’ within the meaning of this regulation.” Furthermore, California specifically exempts cold sandwiches “sold by vendors passing among the passengers or spectators where the food products are not for consumption at tables, chairs, or counters, etc.”
Whole vs. sliced
In New York, sandwiches sold at food stores are taxable whether heated or unheated. The state definition of “sandwiches” includes “cold and hot sandwiches of every kind that are prepared and ready to be eaten, whether made on bread, on bagels, on rolls, in pitas, in wraps, or otherwise, and regardless of the filling or number of layers.” Here comes the surprising part: “A sandwich can be as simple as a buttered bagel or roll.”
It seems the act of cutting and putting something on the cut bread may be what makes a sandwich a sandwich in New York. A whole bagel or roll isn’t a sandwich, but a bagel or roll sliced and smeared with butter or cream cheese is. If you’re hungry for more info, check out Tax Bulletin ST-835, which is devoted to the taxability of sandwiches.
Burrito vs. sandwich
A court in Massachusetts found that “the term ‘sandwich’ is not commonly understood to include burritos, tacos, and quesadillas.” As evidence, it pointed to the New Webster Third International Dictionary, which describes a sandwich as “two thin pieces of bread, usually buttered, with a thin layer (as of meat, cheese, or savory mixture) spread between.”
Yet New York’s list of sandwiches includes the burrito. Clearly New York tax authorities prefer the Oxford Dictionary, which cross-references sandwiches to wraps and acknowledges, “During the 1990s, wraps became a popular new form of sandwich in the United States.”
Seller-prepared vs. not seller-prepared
“Sandwiches not prepared by the sellers” are exempt in Louisiana, but “seller-prepared sandwiches” are taxable.
In New Jersey, prepackaged sandwiches made by a third party are exempt when sold by a seller under the 75 percent threshold*, provided the seller doesn’t hand the customers an eating utensil to consume the sandwich. A seller over the 75 percent threshold that sells prepackaged sandwiches made by a third party and makes eating utensils available to customers must charge tax on the sandwiches.
*The threshold test: Whether the seller’s annual sales of certain types of prepared food make up more or less than 75 percent of its total food sales (excluding alcoholic beverages). New Jersey presumes that businesses over the threshold provide utensils, and that the following types of businesses are over the threshold: cafés, cafeterias, caterers, coffee shops, convenience stores with deli, delicatessens, diners, doughnut shops, and fast-food restaurants.
My husband often says that sandwiches taste better when someone else makes them, and I tend to agree. Perhaps that’s one reason so many of us purchase them when we’re out and about. But when I think about how slicing or heating or serving sandwiches with utensils complicates taxability, it makes me want to stay home and make my own.
Interested in how food is taxed? Read about how California taxes to-go food here.