A Tax on Bagels? You've Got to be Kidding

Whether you prefer your bagel with butter, cream cheese or jam, state tax auditors are making sure you pay an extra eight cents if you sit down in a shop to eat it.

New York's "bagel tax" received attention last month after The Wall Street Journal covered a story about state auditors enforcing the collection of sales tax on bagels that are consumed at restaurants.

The article said that the state has been recently enforcing the "bagel tax" in order to collect additional revenues in a tough economy.

But Brad Maione, Director of Public Information at the New York State Department of Tax and Finance (NYSDTF), told Patch that auditors have been enforcing the sales tax on prepared bagels all along.

"This isn't a 'bagel tax.' This is routine collection of sales tax on bagels in shops that have restaurant facilities," he said.

Maione said he believes the issue made the news only because Kenneth Greene, the owner of 33 Brugger's Bagel franchises in New York, contacted the media after state auditors found that he was not charging sales tax on bagels eaten in his shops, whether they were cut or not.

Melissa A. Fleischut, Vice President of the New York State Restaurant Association, said that NYSDTF has hired "additional auditors and are conducting more audits than ever."

Feischut said that many of the Restaurant Association's members feel that the state's auditing policies presume businessowners are "guilty until proven innocent. Many of them feel this goes against our American legal system."

Other members of the association have accused NYSDTF of wrongly using statistics gathered in a National Restaurant Association survey of 600 to 700 restaurants in the U.S. to determine the amount of sales tax restaurants in New York should typically owe.

"Despite the fact that the survey says it should not be used for such purposes, the department is still using it to determine what a restaurant should owe the state in sales tax," Fleischut said.

For bagel shops here in Rye, some shop managers were reluctant to criticize the state's taxation policies and most seem to view sales tax on prepared bagels simply as an extension of taxation on meals eaten in restaurants.

Bobby Bablqir, manager at Upper Crust Bagel Company said, "we want to comply with the law. If we cut bagels we charge sales tax and if we don't cut them, we don't."

Christine Ponton, manager of Patisserie Saltzburg, said meal taxes "definitely add up." She noted that state law mandates sales tax on coffee whether or not its purchased for take-out. For baked goods though, Ponton said the bakery charges sales tax only if the customer is staying.

But will the "bagel tax" have an effect on whether or not customers request their bagels to stay or to go? Fleischut says no.

"I do not think customers will start taking their bagels home to avoid paying sales tax," she said. "Many customers are getting bagels on their way to work or on their lunch break and need the restaurant to cut and prepare the bagel."