Ruling 2015-4, Sales and Use Taxes, Food Products, Kombucha

FACTS:

A supermarket sells bottles of kombucha beverages to its customers.  Kombucha is a naturally carbonated tea beverage that is marketed as a “functional food.”[1]  It is a sweetened tea beverage that requires fermentation, which creates a natural effervescence (carbonation) and a trace amount of alcohol.

ISSUE:

Is the sale of kombucha exempt because it is a food product for human consumption described in Conn. Gen. Stat. § 12-412(13), or is it a carbonated beverage excluded from the exemption?

RULING:

Sales of kombucha are subject to sales and use taxes because kombucha is a carbonated beverage that is excluded from the exemption for food products for human consumption set forth in Conn. Gen. Stat. § 12-412(13).

DISCUSSION:

Retail sales of tangible personal property in the State of Connecticut are subject to sales and use taxes, unless specifically exempt. Conn. Gen. Stat. §§ 12-407 and 12-408.  Sales of food products for human consumption are exempt from sales and use taxes under Conn. Gen. Stat. § 12-412(13), which defines “food products” to include:

[Cereals] and cereal products, milk and milk products, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products other than candy and confectionery; coffee and coffee substitutes, tea, cocoa and cocoa products other than candy and confectionery. “Food products” do not include spirituous, malt or vinous liquors, soft drinks, sodas or beverages such as are ordinarily dispensed at bars and soda fountains, or in connection therewith, medicines except by prescription, tonics and preparations in liquid, powdered, granular, tablet, capsule, lozenge and pill form sold as dietary supplements or adjuncts.

The definition of “food products for human consumption” is further defined in Conn. Agencies Regs. § 12-426-29 to mean:

[All] products normally consumed by human beings for nutritive value or taste satisfaction, except that the following types of products are not food products and are subject to tax:

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(3) carbonated beverages, including carbonated water.

Kombucha is a carbonated beverage, and carbonated beverages are specifically excluded from the exemption set forth in Conn. Gen. Stat. § 12-412(13).  The exclusion from the exemption for carbonated beverages does not distinguish between beverages in which carbonation is naturally occurring and beverages in which carbonation is artificial.  As a result, kombucha is not exempt as a food product for human consumption, and, therefore, sales of kombucha are subject to sales and use taxes.

OFFICE OF COUNSEL
September 16, 2015