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New York City is enforcing an old tax on sliced and prepared bagels.

When you think of New York cuisine what comes to mind? Is it a piping hot slice of pizza? How about a Nathan’s hot dog? Maybe authentic Chinatown Chinese food? Or New York-style, thin crust pizza? While all are icons of New York gastronomy, for millions of New Yorkers who start their day with a bagel and a shmear, there is nothing more New York than a crusty, chewy bagel.

Unfortunately for New Yorkers, the food police are at it again in New York City. After making transfats illegal for restaurants to serve a couple of years back now New York City is enforcing an old tax on sliced and prepared bagels.

The tax has actually been a law on the books for some time, but it hadn’t been enforced stringently until recently. There is little doubt the financial problems of New York City played a part in the overreaching enforcement of the law.

The size of the tax averages to about eight cents per sliced or prepared bagel, while bagels that are packaged for take- out are not taxed. This may not seem like a big deal, but small business that sell bagels are worried about the impact of the law on their bottom line.

Some companies have even been forced to pay back taxes because the law was so poorly enforced before this year.

“We think it’s unfair. They audited us four times in the past 20 years and never raised this before. We are a law abiding company and tax payers. They are requiring us to pay three years worth of taxes we never collected,” Kenneth Greene, owner of Bruegger’s Bagels told CNN Money recently.

Greene claims that his business didn’t collect the bagel tax from customers in the past as a way to keep prices down and customers happy, but they will have to now.

In 2007 in New York City, 646 restaurants were audited for bagel malfeasance. So far this year that number jumped to 1,077 and there are still four months left in 2010.

Do you think the recent enforcement of the New York Bagel Law is fair to small business owners? Has your business run into indiscriminant enforcement of laws in the past? How have you dealt with these issues?