Breaking Fast and Breaking Down the Bagel Tax

Sure, everyone knows Nova Scotia Lox is more expensive than buying plain cream cheese on a bagel, but did you ever think about the price difference between a whole bagel and a bagel sliced in half?

Since the 1960's, the New York state Department of Taxation and Finance has ruled that as soon as a knife touches a bagel in the store, it becomes subject to tax.  That means that bagels with cream cheese, bagel sandwiches and even just bagels sliced in half are charged with an additional tax, whereas bagels bought whole should not come with tax. 

"What I've always done is include the tax in the overall price of most products," said Alfredo Posada, owner of New York Bagel Authority, in Dobbs Ferry. 

But since the state recently said they would heighten their audit and compliance efforts on this seemingly obscure tax, Posada is thinking about reprinting his menu to represent the prices accordingly. 

"The state has decided it will be more careful about how the tax is collected, so now I'll have to be able to show just how I generate the amount I pay the state," Posada said. 

The price of an individual bagel may look lower on Posada's revamped menu, but he concedes he'll have to be meticulous about whether he and his cashiers hit the "tax" button on the register after ringing-up every order.

Whole muffins are not taxable, nor are drinks and packaged biscotti. "But slices of pound cake are," he said. "That's because I bake the whole cake and then slice it into individual pieces."

Pyong Chong, owner of Hastings Own Bagel, is also careful to comply with the law, but works the tax into customer prices slightly differently.

"For plain bagels or bagels with cream cheese, I don't add on the additional tax on a customer's receipt," he said. "I just factor it into the overall price."

For bagel sandwiches, though, he does tack on he tax. "The individual ingredients that go into the sandwiches are too expensive for us not to add the tax on additionally," he explained. 

Although both local bagel-sellers have complied with this odd and until recently under-the-radar tax, Posada is resentful that the state will be scrutinizing small businesses' practices as a means to raise more money for Albany.

"The state is trying to find the last penny it is entitled to," Posada said. "And now rumor has it they'll be sending people to bagel shops to see if they can get more from us."