Summer Cruising in New York

Most people are probably not aware that the taxability of a cruise ticket in New York depends on whether or not food or drink is included in the ticket price. For instance, many cruises offer “all-inclusive” tickets that include all of your meals and drinks in the ticket price. Some cruises offer tickets that simply allow for admission, and all meals and drinks must be purchased by the customer. Finally, there are certain cruise tickets that allow the purchaser a limited amount of food and drink, such as two ‘free’ drink tickets. Where Does the Legal Basis to Tax Some Cruises Come From? New York Tax Law section 1105(a)-(c) taxes the sale of most tangible personal property and some services. A sightseeing cruise is not included in the Tax Law as a taxable service, so a ticket that just provides for admission to such a cruise would not generally be taxable.  However, Tax Law section 1105(d) taxes the sale of all food and drink when sold in or by restaurants, taverns, caterers or other similar establishments. This is commonly referred to as a “meals tax.” To Tax or Not to Tax Cruise Tickets: The Food and Drink Tipping Point An advisory opinion was recently issued in New York that discusses the taxability of tickets to a “party cruise” around New York Harbor. This particular cruise ticket includes access to a “hot appetizer buffet” for one half-hour during the cruise and two drink tickets that can be exchanged for drinks at the bar. Because the tickets include the appetizers and drink vouchers, the advisory opinion held that they were subject to sales tax under Section 1105(d). Although the petitioner argued the food and drinks were just incidental to the cruise, the opinion rejected this argument, stating the cruise company (a) hired a caterer that provided food that took a significant time to prepare; and (b) paid the boat owner to serve drinks to the passengers. This opinion goes on to clarify that if the price of the ticket is just for a sightseeing cruise, and does not entitle the purchaser to “food or drink that is more than incidental to the charge of the cruise itself,” the ticket would not be subject to sales tax. This leaves open the possibility for a cruise ticket to include a de minims amount of food or drink without being subject to the sales tax. Exactly how much food or drink can be included, however, is certainly not clear.