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New York’s Bagel Tax

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Photo by Helen Cook on Flickr

Photo by Helen Cook on Flickr

Want your bagel sliced in New York? There’s a tax for that.

The state’s Department of Taxation and Finance has begun enforcing a previously little-known provision that adds sales tax to “sliced or prepared bagels (with cream cheese or other toppings)” and also bagels consumed in the store, according The Wall Street Journal.

Note that if you take your whole, unsliced bagel home, there is no sales tax applied; this is because, as a spokesperson for the Department of Tax and Finance said, “any handling or preparation at the shop turns it into a taxable event.”

How did the bagel tax come to be enforced? Some are saying that because New York needs money, it’s turning to this tax provision, which adds about eight cents per bagel, to help raise revenue. The state has been auditing companies for the past couple years and even charging back taxes, which could reach into the thousands of dollars per store. CNNMoney reports that in 2009, 2,732 restaurants were audited for not charging the bagel tax, and of those 646 were in New York City. So far in 2010, over 1,000 NYC bagel joints have been audited.

Not surprisingly, many customers aren’t happy about the new-to-them tax, and neither are some bagel store owners, particularly in light of the current state of the economy; as the WSJ notes, “the rule isn’t spelled out in the tax code,” which leads to the puzzling result that although sliced bagels are taxed, sliced bread from a bakery isn’t.

The Department of Taxation and Finance has commented that it will seek to provide more advice to store owners on the bagel tax in the future, but for those of you bagel-shopping in New York, don’t be surprised if your sliced or prepared bagel is a little more costly than usual.

Have you been subjected to the bagel tax? What do you think of the enforcement of this provision?

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August 26th, 2010 at 2:10 pm

Posted in Taxes

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