In a large mixing bowl, combine the sifted powdered sugar and meringue powder.
Add the warm water and vanilla extract to the dry ingredients.
Using an electric mixer on low speed, mix the ingredients until combined, then increase to high speed and beat until stiff peaks form, about 5 minutes.
Divide the royal icing into separate bowls depending on how many colors you want to use.
Add gel food coloring to each bowl and stir until the color is evenly distributed. Add more coloring for deeper hues.
Adjust the consistency of the icing by adding a few drops of water to thin it for flooding or adding powdered sugar to thicken it for outlining.
Transfer the icing to piping bags fitted with small round tips for detailed designs or use squeeze bottles for easier control.
Outline the edges of your sugar cookies first with thicker icing, then flood the inside with thinner icing using a toothpick or small spatula to spread evenly.
Allow the icing to dry completely at room temperature, about 4 to 6 hours, before stacking or packaging the cookies.