Whether you know it or not, every time you order a bagel slathered with cream cheese at a New York City deli or bodega, you’re subject to an additional tax. And yet if you were to purchase those items separately — i.e. a tub of cream cheese and a single, unsliced bagel — no “bagel tax” would be levied.
If that sounds quibbling to you, well, frankly, it is. The idea is that a whole bagel (i.e. one you might buy at a grocery store) is a grocery item to be consumed, ostensibly, at home, and thus exempt from NY state sales tax. Once the bagel has been sliced at the time of order — and whether you put cream cheese or butter on it or not — it is then considered a prepared food (i.e. like something you’d order at a restaurant), hence it can be taxed as such. It’s all there in the New York tax code.