New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IV - Sales And Use And Other Miscellaneous Taxes
Subchapter A - Sales And Use Taxes
Part 528 - Exemptions
Section 528.27 - Eligible food purchased with food stamps

Universal Citation: 20 NY Comp Codes Rules and Regs ยง 528.27

Current through Register Vol. 46, No. 12, March 20, 2024

Tax Law, § 1115(k)

(a) Definitions.

(1) Food stamps.

The term food stamps when used in this section means coupons issued under or pursuant to the Federal Food Stamp Act of 1977 (7 U.S.C. § 2011 et seq.), as amended.

(2) Retail food stores and other participants.

The term retail food stores and other participants means entities authorized to accept food stamps, including:

(i) an establishment (such as a supermarket or grocery store), a recognized department of an establishment or a house-to-house trade route, whose eligible food sales volume is more than 50 percent of staple food items intended for home preparation and consumption, such as meat, poultry, fish, bread and breadstuffs, cereals, vegetables, fruits, fruit and vegetable juices, and dairy products;

(ii) public or private communal dining facilities and meal delivery services;

(iii) private nonprofit drug addiction or alcoholic treatment and rehabilitation programs;

(iv) publicly operated community mental health centers that conduct residential programs for drug addicts and/or alcoholics;

(v) private or public nonprofit group living arrangements;

(vi) public or private nonprofit shelters for battered women and children;

(vii) private nonprofit cooperative food purchasing ventures, including those whose members pay for food prior to receipt of the food;

(viii) wholesale food concerns which sell eligible foods to retail food stores or to meal services for resale to households;

(ix) farmers' markets; and

(x) restaurants authorized by the United States Department of Agriculture to accept food stamps for meals purchased by the elderly and supplemental security income benefit (SSI) recipients and spouses of those elderly and SSI recipients.

(3) Eligible foods.

The term eligible foods means food and nonfood items and meals, eligible to be purchased with food stamps, including:

(i) any food or food product intended for human consumption, except alcoholic beverages, tobacco products, and hot foods and hot food products prepared for immediate consumption (other than meals described in this paragraph);

(ii) fruit and vegetable seeds and plants to grow food for the personal consumption of eligible households;

(iii) meals prepared and delivered by an authorized meal delivery service to households eligible to use food stamps to purchase delivered meals;

(iv) meals served by an authorized communal dining facility for the elderly, SSI households or both to households eligible to use food stamps for communal dining;

(v) meals prepared and served by a drug addiction or alcoholic treatment and rehabilitation center to eligible households;

(vi) meals prepared and served by a group-living-arrangement facility to residents who are blind or disabled recipients of benefits under Title II or Title XVI of the Social Security Act;

(vii) meals prepared and served by a shelter for battered women and children to its eligible residents; and

(viii) restaurant meals prepared and served in restaurants authorized by the United States Department of Agriculture to accept food stamps for meals purchased by the elderly and SSI recipients and their spouses.

(4) Otherwise taxable eligible food. The term otherwise taxable eligible food means that eligible food which is ordinarily subject to sales and use taxes but exempt from such taxes when actually purchased with food stamps pursuant to subdivision (b) of this section. Examples are:
(i) fruit and vegetable seeds and plants to grow food for the personal consumption of eligible households;

(ii) candy and confectionery;

(iii) fruit drinks containing less than 70 percent natural juices;

(iv) soft drinks and sodas;

(v) cold sandwiches;

(vi) bottled water;

(vii) baking nonstick sprays;

(viii) ice; and

(ix) meals served (a) in restaurants authorized by the United States Department of Agriculture to accept food stamps from the elderly and SSI food stamp recipients and their spouses or (b) by those other participants described in paragraph (2) of this subdivision.

(b) Exemption.

Receipts from the sale of eligible food by retail food stores and other participants are exempt from State and local sales and compensating use taxes imposed by article 28 and pursuant to the authority of article 29 of the Tax Law when such eligible food is actually purchased with food stamps.

(c) Nonqualifying purchases.

Food stamps cannot be used to purchase certain items commonly sold by retail food stores and other participants, such as:

(1) nonfood items such as pet foods, soaps, paper products, household supplies, grooming items and cosmetics;

(2) alcoholic beverages;

(3) tobacco and tobacco products;

(4) meals and heated food, unless qualified as eligible food (see paragraph [3] of subdivision [a] of this section).

(d) General rule for applying food stamps to the purchase of eligible food.

No tax is due when eligible food is purchased with food stamps. When a customer purchases eligible food, some of which is otherwise taxable eligible food, and the customer does not have enough food stamps to cover the entire purchase, the vendor must apply the food stamps first to the payment of the otherwise taxable eligible food. Thus no tax is due on such food to the extent purchased with food stamps. If any food stamps remain after payment of such otherwise taxable eligible food, the vendor should apply them to the balance of the eligible food. To the extent cash is tendered in payment of otherwise taxable eligible food, tax must be collected.

Example 1:

A food stamp recipient purchases $50 worth of eligible food of which $20 is otherwise taxable eligible food and $30 is nontaxable items. The recipient pays with $25 of food stamps and the balance in cash. The $25 in food stamps is applied first to the $20 of otherwise taxable eligible food, and the balance to the nontaxable items. Since all of the otherwise taxable eligible food is purchased with food stamps, no tax is due on this purchase.

Example 2:

Same facts as Example 1 except the recipient pays with $15 in food stamps and the balance in cash. Applying the $15 in food stamps first to the $20 cost of the otherwise taxable eligible food leaves $5 in such items purchased with cash, which are thus subject to tax. Presuming a tax rate of seven percent (four percent State, three percent local), the recipient must pay tax of 35 cents on the $5 in otherwise taxable eligible food purchased with cash.

(e) Special rule for applying food stamps when discount coupons are also tendered.

When a customer tenders discount coupons together with food stamps and cash (if any) to purchase eligible food, the vendor must apply the discount coupons first to the cost of the eligible food to which they relate. Food stamps and cash (if any) are then applied to the balance of the cost of the eligible food according to the general rule described in subdivision (d) of this section. The portion of the purchase price paid for with the discount coupon may or may not be taxable, depending on whether it is a store coupon or manufacturer's coupon, and, of course, on whether the item purchased is one subject to tax in the first place.

(1) Store coupons are coupons issued by a store or chain of stores, for which the store does not receive any reimbursement. Such store coupons actually reduce the price charged to customers for the items to which they relate and thus reduce the receipt subject to tax, if any. When otherwise taxable eligible food is purchased with such a store coupon and food stamps, the price is reduced by the value of the coupon, and food stamps may be accepted in payment of the balance. Under such circumstances, no tax is due on such purchase.

Example 3:

A food stamp recipient gives a food merchant $9 in food stamps and a store coupon worth $1 in payment of $10 worth of eligible food. There are no receipts subject to tax and no sales tax is due on this purchase, since the $9 paid for with food stamps is always exempt, and the $1 store coupon reduces the price to the purchaser. In this example, it would not matter whether the eligible food is otherwise taxable, since the entire amount is paid for with food stamps and store coupons.

(2) Manufacturer's coupons are issued by the manufacturer or producer of eligible food, and represent an intention by such manufacturer or producer to reimburse the vendor for accepting such coupon from its customers. Manufacturer's coupons thus do not serve to reduce the receipt subject to tax, if any. Rather, such coupons are to be treated as the equivalent of cash. Coupons issued by stores where the manufacturer or producer reimburses the store are treated as manufacturer's coupons. When eligible food is purchased with manufacturer's coupons, food stamps and cash (if any), such coupons are first applied to the items to which they relate. In conformance with the general rule, food stamps are then applied first to otherwise taxable eligible food and then, if any food stamps remain, to the remaining eligible food. Tax must be collected on the portion of the purchase price paid for with manufacturer's coupons and cash (if any).

Example 4:

A food stamp recipient gives a food merchant $9 in food stamps and a manufacturer's coupon worth $1 in payment of $10 worth of eligible food. The $9 portion of the purchase price is exempt from sales tax because it is paid for with food stamps. The $1 paid for with the manufacturer's coupon will also be exempt from tax if the item purchased is not otherwise taxable; that is, if the item is actually food for human consumption, such as meat, milk or cereal. But the $1 paid with the manufacturer's coupon will be subject to tax if the item purchased with such coupon is otherwise taxable eligible food, such as carbonated beverages, candy, ice or gardening seeds.

(3) Double or triple coupons.

When a store doubles, triples or otherwise supplements the value of a manufacturer's coupon, the excess value added by the store (for which the store does not receive reimbursement) is treated as a store coupon and the face value of the manufacturer's coupon is treated as a manufacturer's coupon. That is, the value added by the store serves to reduce the purchase price subject to tax, if any, but the value of the manufacturer's coupon does not.

Example 5:

A customer purchases $200 in groceries consisting of $30 worth of soap and paper products (which are not eligible to be purchased with food stamps) and $170 worth of eligible food. Included in the $170 worth of eligible food are $50 worth of otherwise taxable eligible food items. The customer pays for the groceries with $168 in food stamps, $2 in manufacturer's coupons (which relate to the otherwise taxable eligible food items) and the balance in cash ($30 not including tax). In this instance, the store first applies the $2 in manufacturer's coupons to the otherwise taxable eligible food to which they relate and then accepts the $168 in food stamps for the balance of the eligible food. The store must collect tax on receipts of $32, consisting of the $2 value paid for with the manufacturer's coupons and on the $30 worth of soap and paper products.

Example 6:

A customer purchases $200 in groceries consisting of $30 worth of soap and paper products (which are not eligible to be purchased with food stamps), and $170 worth of eligible food. Of the $170 of eligible food items, $50 are otherwise taxable eligible food items. The customer pays for the groceries with $48 in food stamps, $2 in store coupons related to the $50 in otherwise taxable eligible food items (for which the store receives no reimbursement), and the balance with cash ($150 not including tax). Under these circumstances the store will be required to collect tax only on the $30 attributable to the soap and paper products purchased with cash, since the $48 in food stamps are applied first to the $48 net price of the otherwise taxable eligible food items.

Example 7:

A customer purchases $200 in groceries consisting of $30 worth of soap and paper products (which are not eligible to be purchased with food stamps) and $170 worth of eligible food, of which $50 are otherwise taxable eligible food. The customer has $2 in manufacturer's coupons relating to the $50 in otherwise taxable eligible food, which will give the customer a $4 discount under the store's double coupon policy. The customer pays for the groceries with $60 in food stamps, the $2 in manufacturer's coupons (for which $4 credit is given) and the balance in cash ($136 not including tax). Under these circumstances, the store will be required to collect tax on receipts of $32, consisting of the $30 worth of soap and paper products plus the $2 attributable to the manufacturer's portion of the double coupon. No tax is required to be collected on the store's portion of the double coupon discount.

Cross-reference:

For further information on manufacturer's and store coupons, see section 526.5(c) of this Part.

(f) There are special recordkeeping requirements for retail food stores and other participants in section 533.2(d)(7) of this Title, in addition to the general recordkeeping requirements found in section 533.2.

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