Do I Charge Sales Tax on Cottage Food or Catering in New York?

Cottage food: in New York, most home processor sales are not subject to sales tax, because food sold unheated, for consumption off premises, and not prepared ready-to-eat is exempt, and the bulletin lists "bakery products, including bread, rolls, donuts, cakes, and pies" among exempt foods (NY TB-ST-283). Catering: taxable across the board. New York's caterer bulletin, updated April 2, 2026, says all charges by caterers related to a customer's event are taxable, including rentals and staff, and mandatory gratuities are taxable unless three specific conditions are met (NY TB-ST-110).

This article explains the rules and links the authorities that set them. It is not tax advice, your state's Department of Revenue and your accountant are the final word for your situation.

Home processors: registered with Ag and Markets, mostly exempt at the register

New York's cottage food program runs through the Department of Agriculture and Markets as the Home Processor registration: shelf-stable items like breads, baked goods, high-acid jams, granola, and crackers, with anything requiring refrigeration prohibited (NY Ag & Markets, home processing). Unusually for a cottage law, New York allows both retail and wholesale, farmers markets through internet sales, as long as everything stays inside New York State.

The registration answers the food-safety question, not the tax one; Ag and Markets itself points processors to the Department of Taxation and Finance for sales tax. There, the food-store rule does most of the work: food is exempt unless "it is sold heated; it is sold for consumption on the premises; or it has been prepared by the seller and is ready to be eaten" as a meal (TB-ST-283). A cold loaf or a boxed cake sold at a market fits the exemption. Not every home-processor product does, though: New York draws its own lines around categories like candy and confectionery, so if you make confections rather than baked goods, check the DTF's taxable-and-exempt food listings for your specific product before deciding.

Catering: everything on the invoice, and the gratuity rule people miss

TB-ST-110 leaves little room: all charges related to the event are taxable, food and beverages, room and equipment rentals, tables, chairs, tents, linens, decorating, even parking services, whether the event is at your banquet room, a hotel, or the client's home (TB-ST-110).

The gratuity rule is the one to memorize. Voluntary tips a customer leaves for the wait staff are not taxable. A mandatory gratuity is taxable unless all three conditions hold: the charge is shown separately on the bill, it is identified as a gratuity, and all of the money goes to the employees. Keep any of it for the house, or label it a "service charge" instead, and it is taxable; charges not specifically listed as gratuities are always subject to sales tax. If you bill an automatic 20 percent, the label and the payout records decide whether that line carries tax.

The local wrinkle: the rate follows the delivery

New York is destination-based, and the DTF says it plainly: "The jurisdiction (locality) where the item is delivered usually determines the local rate. The point of delivery is where ownership (title) and/or possession of the item is transferred by the seller to the purchaser" (NY TB-ST-825). Every county and city sets its own local rate on top of the state's (current as of July 2026), so a Westchester caterer serving a Manhattan wedding charges the combined rate for the venue's address, not Westchester's. For a home processor shipping within the state, taxable items take the rate where the package lands. On the rare taxable sale, look the rate up by address instead of reusing your own.

FAQ

"Drawing up a banquet invoice, do I tax the gratuity?" (asked verbatim on a chefs' forum) In New York, only if it fails the three-part test. Separately stated, labeled a gratuity, fully paid out to staff: not taxable. Anything short of that, including any "service charge": taxable (TB-ST-110).

"Do I need to charge sales tax for cottage food sales?" In New York, generally no for cold, shelf-stable baked goods sold to take home. Heated food, on-premises consumption, ready-to-eat preparation, or a category like candy can change the answer.

"If the invoice is $80 for food and service plus a 20% mandatory gratuity, is tax on $100 or $80?" (a chef's question on a paid Q&A site, lightly adapted) In New York, the food and service portion is taxable either way. The mandatory gratuity joins the taxable amount unless it meets all three conditions above.

Where Savi Tools fits

Savi Tools looks up the sales tax rate by address on the invoice, which is exactly what a destination state like New York asks of you. On the Growth plan, when your client has a full address, every invoice gets the jurisdiction-accurate rate applied automatically, and every taxed invoice records the state and ZIP it was taxed for. Your dashboard keeps a running view of what you've collected, split paid vs invoiced and address-accurate vs estimated, and at filing time you (or your accountant, through their free seat) export a clean CSV: state, ZIP, taxable amount, tax collected. Savi Tools tracks and reports; it does not file or remit tax, and it does not tell you where you owe, that stays with you and your accountant. Growth is $19/month. Start free →

Savi Tools tracks and reports collected sales tax by state and ZIP. It does not file or remit tax and does not provide nexus or tax advice. Consult your accountant. Never get surprised at tax time.