Confectioners Lees of Scotland and Tunnock's went to court after they were ordered to pay millions by HM Revenue and Customs, which insisted Snowballs did not enjoy the same exemption from VAT as tea cakes.
The companies refused to accept that the bite-size classics were "standard-rated confectionery".
After two judges at the First-Tier Tax Tribunal indulged in the snacks - "in moderation" - they decided the sticky issue by finding that Snowballs are cakes and thus VAT zero-rated.
Judges Anne Scott and Peter Sheppard were presented with a plate of Jaffa Cakes, Bakewell tarts, tea cakes, Lees Snowballs and Waitrose meringues as they deliberated.
"We found that the plate looked like a plate of cakes," Judge Scott observed.
"We were also left with samples of all of these, together with Tunnock's Snowballs. We tasted all of them, in moderation, either at the hearing or thereafter.
"A Snowball looks like a cake. It is not out of place on a plate full of cakes. A Snowball has the mouth feel of a cake."
Lees and Tunnock's insisted their Snowballs should be VAT free, like Jaffa Cakes. However, HMRC argued that they were, in fact, confectionery.
Claims for a £2 million VAT rebate by Lees of Scotland Ltd, and for £800,000 by Thomas Tunnock Ltd, were rejected in 2012.
Philip Simpson, for the firms, appealed to the judges' taste buds, contending that the favourite titbit should be VAT exempt. But Luke Connell, for HMRC, insisted the taxman should be allowed to take his bite.
Judge Scott said it was not disputed that Snowballs were a "sweetened prepared food which is normally eaten with the fingers" and "certainly not a biscuit".
Snowballs are believed to derive from a shaved ice New Orleans snack, first on offer in the 1930s.
Judge Scott said Snowballs and tea cakes made by North Lanarkshire-based Lees - often manufactured for supermarket's own brands - were sometimes promoted together, appeared on the same shelf and were sold at similar prices.
Tunnock's, which only makes its own brand Snowballs, produces a snack "much softer and more fragile than the tea cake". They are usually offered in the biscuit aisle.
Judge Scott said the tribunal was "wholly agreed" a Snowball was a "confection to be savoured but not whilst walking around or, for example, in the street".
"Most people would prefer to be sitting when eating a Snowball and possibly, or preferably ... with a plate, a napkin or a piece of paper or even just a bare table so that the pieces of coconut which fly off do not create a great deal of mess.
"Although by no means everyone considers a Snowball to be a cake, we find that these facts, in particular, mean that a Snowball has sufficient characteristics to be characterized as a cake.
"For all these reasons the appeals succeed."
An HMRC spokesman said it was considering the court's decision.
Lees and Tunnock's said they could not comment while the ruling could be subject to appeal.