In a large bowl combine flour, baking powder, and salt.
In the bowl of a stand mixer combine butter and sugar. Mix to combine to a paste consistency, but not light and fluffy. Add in vanilla extract, milk and egg. Mix to combine. Add in flour and mix to combine.
Take 1/3 of the dough and divide into 4 sections. Using food coloring color each of the sections your desired color.
Place each of the colored sections onto a piece of parchment paper, roll into a 1/4" thick section and place in the refrigerator to harden up for 20-30 minutes.
Take the remaining dough and roll out onto a well floured surface (or between two pieces of parchment paper) to your desired thickness. If the dough is super sticky, then you may need to chill the dough.
After the colored pieces have firmed up, use small cookie cutters to cut out desired shapes.
Arrange each of the small colored pieces onto the large rolled dough into your desired design. Once all pieces are placed, cover the dough with a piece of parchment paper and lightly roll the top to press the colored pieces into the dough.
Cut dough into desired shapes and place onto a baking sheet. If you want to prevent too much spreading, Place the baking sheet into the freezer for 10-15 minutes (or refrigerator for 30 minutes).
Bake at 350 for 12-15 minutes. Allow to cool on baking sheet for an additional 10 minutes before transferring to a cooling rack.