Ireland court rules that Subway's sandwich bread is not legally bread

LONDON -- Ireland's Supreme Court has issued a ruling declaring that for the purposes of tax law, the bread served in Subway's hot sandwiches does not actually meet the legal definition of "bread" because of its sugar content and is rather a "confectionary or fancy baked good."

The case was brought before the court by Subway franchisee Bookfinders Ltd. which claimed that the bread Subway served qualified as a "staple food," which, in Ireland, means that the bread would be exempt from value-added tax (VAT), thereby saving Subway money.

The ruling, which was handed down on Sept. 29 by the five-judge Irish Supreme Court, said that the bread's sugar content -- which is five times higher than what was set out in Ireland's Value-Added Tax Act of 1972 -- is too sugary to meet the legal definition of bread and therefore cannot be called a staple food.

"The argument depends on the acceptance of the prior contention that the Subway heated sandwich contains 'bread' as defined, and therefore can be said to be food for the purposes of the Second Schedule rather than confectionary. Since that argument has been rejected, this subsidiary argument must fail," the court distinguished in its official judgement.

According to the Value-Added Tax Act of 1972, the sugar allowed in a bread product must not be more than 2% of the total weight of flour in the dough. Subway's dough across all of their bread options as listed by the nutritional information on their website -- white bread, Italian, nine-grain wheat, honey oat, Italian herbs and cheese, nine-grain multiseed, and hearty Italian -- all contain about 10% sugar content.

According to the Independent in Ireland, the case first arose by Bookfinders from a 2006 decision by the Revenue Commissioners which refused to give them a refund for VAT payments made between early 2004 and late 2005. Bookfinders claimed it was entitled to a refund on the grounds that the VAT should have been 0% because it qualified as a staple food.

Justice Donal O'Donnell in the Ireland Supreme Court ruling said that the definition of "bread" was originally established to make a distinction between the starch in other baked goods, like cookies or cake or brownies, that are sugary and therefore not healthy enough to be considered essential foods.

"Subway's bread is, of course, bread," Subway said in a statement given to ABC News. "We have been baking fresh bread in our stores for more than three decades and our guests return each day for sandwiches made on bread that smells as good as it tastes."