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California Sales Tax & Hot Sandwiches at Subway

Little known fact, I love Subway Sandwiches. Like a lot. In law school, there was one on my home and I’d stop in there every night. If you’re in California and have been to a Subway Sandwich, you may have noticed that a hot or toasted sandwich costs more than a cold one, all else being equal. One of the Subways in my neighborhood has this sign on its register:

Tax or not?

Tax or not?

Now, personally, a hot sandwich sounds disgusting as all get out, but to each their own. This “sales tax on hot sandwiches” things is apparently a big deal as I’ve seen other Subways with signs similar to this, no doubt attempting to placate customers of hot sandwiches angry about the higher price.

I spent some time looking and as best I can tell, the California state law in question is California Revenue and Taxation Code section 6359. It is a bit long to cut and paste for you, but the basic idea is this:

  1. Those of us who have gone grocery shopping in California know that you don’t pay sales tax on most grocery items. That is the general rule that, essentially, described in section 6359(a). Section 6359(b) defines in very broad strokes what groceries are exempt from sales tax under Section 6359(a). Section 6359(c) defines some grocery categories that you definitely have to pay sales tax on.
  2. As usual, though, there are exceptions to the general rule in section 6359(a). Section 6359(d) defines seven categories of items on which you have to pay sales tax. Number 7 (i.e. Section 6359(d)(7)) is products sold as “hot food products”.

“Hot food products” is itself defined in section 6359(e) as: (emphasis added)

 "'Hot prepared food products,' for the purposes of paragraph
(7) of subdivision (d), include a combination of hot and cold food
items or components where a single price has been established for the
combination and the food products are sold in combination, such as a
hot meal, a hot specialty dish or serving, a hot sandwich, or a hot
pizza, including any cold components or side items. Paragraph (7) of
subdivision (d) does not apply to a sale for a separate price of
bakery goods or beverages (other than bouillon, consommé, or soup),
or where the food product is purchased cold or frozen; "hot prepared
food products" means those products, items, or components that have
been prepared for sale in a heated condition and that are sold at any
temperature that is higher than the air temperature of the room or
place where they are sold."

I’ve also noticed that Subway charges sales tax for when you have your food for here instead of to go. This looks to be under section 6359(d)(2).

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Andy Chen

Andy I. Chen is a lawyer licensed to practice law in California and New York. Andy maintains offices in Los Altos, California and Modesto, California. Under the New York Court of Appeals' 2015 decision in Schoenefeld v. State of New York, Andy does not accept cases from those in New York state. He does, however, know many lawyers in New York state and would be happy to make a referral.

8 Comments

  1. So, if I buy my soda separate, not in a meal deal, then I should not be taxed on it, correct?

    Reply
  2. I went to subway today in Sacramento , ca. And got charged a sales tax on a cold sandwich

    Reply
  3. Recently purchased a cold sandwich at a Subway located in a shopping mall and was charged sales tax- assuming I did not consume the food in the mall is the tax charge legal? Mall is in Calif.

    Reply
    • Did you ever find out if this is legal? I just got charged sales tax on a cold to go sandwich at subway too..

      Reply
  4. Than this shouldn’t apply to cold sandwiches. A cold cut that’s been toasted, than prepared with colds, is going to be room temp by the time it reaches the register.
    If you’re eating a Meatball,
    Phillies, or a Hot Pastrami? Suck it!
    Also, Subway makes their own bread. It’s heated, cooled and served. It being toasted is just a repeat of the prior.
    The moral of the story is Subway doesn’t have any Lobbyists on retainer.

    Reply
  5. I have purposely ordered cold sandwiches from Subway just to avoid the taxes. Yesterday, for the first time, they charged sales tax for a cold sandwich. The server argued with me that he’s worked there for 5 months and always charged sales tax, even though that same server never charged me sales tax before.
    The manager eventually returned my tax money though she didn’t admit fault. What’s up with that? Is Subway rigging their registers lately? Was there some change in the tax law?

    Reply
  6. So the manager/owner, of Subway, in Orange, CA called me up to explain how he would re-train his employee on the practice of sales tax for either A Hot Sandwich (yes tax) or B Cold Sandwich (no tax). My reward for reporting the ‘misunderstanding’ was a FREE cookie from the manager himself. Now that the sandwich maker knows who I am, don’t I feel lucky.

    Reply
  7. You can tell Subway that the sandwich is to go and then eat it there. Many similar stores have tax included and pay their tax upon an estimate of how much is to go and how much is eaten in.
    Be careful when they ask you if you want your sandwich heated, it can cost you the sales tax.

    Reply

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