This finding by Ireland’s highest court requires Bookfinders Ltd., an Irish Subway franchise, to pay a value-added tax (VAT) on its sandwiches. Sweets and pastries are not considered an essential food under Irish law and are, therefore, subject to a value-added tax of 13.5 percent under Ireland’s VAT Act of 1972. “Staple foods,” like bread, are not subject to this tax. However, to qualify as a staple product, the Irish government defines bread as a product wher “fat, sugar and bread improver, subject to the limitation that the weight of any ingredient specified in this subclause shall not exceed 2 percent of the weight of flour included in the dough.”

In the judgment, the court ruled, "There is no dispute that the bread supplied by Subway in its heated sandwiches has a sugar content of 10% of the weight of the flour included in the dough, and thus exceeds the 2% specified."

Subway maintains that its bread is only bread, and MarketWatch reported that the company is currently reviewing the tax ruling.

This latest ruling from the Irish Supreme Court was heard on appeal after the case meandered through four appellate courts over 14 years wher it was heard and then subsequently dismissed in each case. Subway’s Galway-based franchisee sued the Irish taxing authorities for a refund of VAT paid between 2004 and 2005. The company argued that its heated sandwiches, coffees and teas were eligible for 0% VAT. The composite VAT rate they paid was 9.2%.

Subway is not unfamiliar with controversy. The company came under scrutiny in 2014 when reports surfaced that its bread was baked with a chemical used in yoga mats. In response, the company removed the ingredient and changed the recipe. Depending on whether the company accepts the ruling from the countrys highest court, it could consider another reformulation of its sandwich rolls in order to qualify under the legally defined definition for bread.