As long as it does not contain a trademark, or that trademark is of a fictional character who is not themselves advertising a physical product, IMO it is in fact art. The moment you say they're Doritos specifically (and put the signage in a public space) or another such brand (Tostitos, Aribas, you get the idea) it's advertising by that specificity.

This, however, is clearly "generic" homemade donuts. The brand of the store is on the lower part but what trademark does the upper section feature? If the rays of sunshine were painted around the sign, or the kids painted it as a goodwill volunteer effort, I don't think the town can justify removing it except in a "there's a rule" way, and honestly? For something like this, screw the rules, we have the spirit of the law to consider.