A New York statewide trade association representing the interests of all sizes of food stores petitioned the state of New York for an “Advisory Opinion” as detailed in  NY TSB a10(49)S. The petition resulted from reports that the trade association’s members in New York City were being fined by the New York City Department of Consumer Affairs for charging sales tax on the retail sale of Red Bull Energy and Sugar Free Shots. The NYC Department of Consumer Affairs claimed that the drinks labeled as dietary supplements are not subject to the sales tax.  The sellers, by collecting a tax on the sales of these beverages were deemed to be in violation of the NYC Deceptive Trade Practices Act.  After analysis of the container labeling the state affirmed the petitioner’s assumption the beverage in question was a non-carbonated beverage that is marketed primarily as an energy drink.

While Tax Law section 1115(a)(1) offers an exemption for “…beverages, dietary foods and health supplements, sold for human consumption, but not including soft drinks and sodas, unless they are sold for 75 cents or less through a vending machine activated by the use of coin, currency, credit card or debit card. Soft drinks and sodas include carbonated and noncarbonated beverages, carbonated water, dietetic beverages and cocktail and other alcoholic drink mixes.” Red Bull shots are soft drinks or dietetic drinks. Thus, Red Bull shots are subject to state and local taxes because they do not qualify for the exemption.

Similar drinks such as Awake and Gatorade have previously been classified as taxable as detailed in Publication 840, A Guide to Sales Tax for Drugstores and Pharmacies, page 27, and Publication 880 Taxable and Exempt Foods and Beverages Sold at Retail Food Markets and Similar Establishments. The food stores must continue to collect the state and local taxes on their sales of Red Bull shots.