New York – Taxability of a Beverage Made From fruits, Vegetables, and Nuts

SALT Report 3040 – The New York Division of Taxation issued a ruling regarding the application of sales tax to a beverage that is made from vegetables, nuts, fruits, seeds, and spices. The Taxpayer states that the beverage is not sold for immediate consumption; it is perishable and must be refrigerated at all times; it is not carbonated; and it does not contain any refined carbohydrates or cane sugar.

In its response, the Department referred to New York Tax Law 1115(a)(1), which states that food, food products, beverages, dietary foods, and health supplements sold for human consumption are exempt from sales and use taxes.  This exemption does not apply to beverages that are: fruit drinks that contain less than 70% natural fruit juice; soft drinks, sodas, and beverages that are typically dispensed from a soda fountain; and beer, wine or other alcoholic beverages.  However, the Department stated that under the provisions of 20 NYCRR § 528.2(b)(5) “vegetable juices, whether made of a single vegetable, or a combination of vegetables, or a combination of a vegetable and other food product are exempt beverages.”

Based on the above, the Department determined that the Taxpayer’s beverage does not meet the definition of a taxable fruit drink, soft drink, or alcoholic beverage as described in Tax Law §1115(a)(1).  Further, because the beverage is made from a combination of vegetables and other food products, and is similar to vegetable drinks previously found to be exempt in TB-ST-525, retail sales of the Taxpayer’s beverage are not subject to sales tax.

For Further Information

New York Commissioner of Taxation and Finance – TSB-A-13(34)S