Ruling 2016-2, Sales and Use Taxes, Food Products, Nonprescription Drugs and Medicines
The Company sells powdered nutritional shake mixes and nutrition bars that contain the nutrients, protein, and fibers of whole foods, which are marketed for sale as snacks or meal substitutes (“Snacks”).
The Company also sells chewable tablets and capsules that it describes as “made from and categorized as whole foods.” Fruits, vegetables and grains (including peels, seeds and leaves) are juiced, dehydrated, and powdered, and then incorporated into the chewable tablets and capsules (“Concentrates”).
The labels on the Snacks and the Concentrates bear the “Nutrition Facts” box as described in Title 21 of the Code of Federal Regulations § 101.9.
Are sales of the Snacks and Concentrates exempt from sales and use taxes as sales of food products for human consumption under Conn. Gen. Stat. § 12-412(13)?
The sales of the Snacks and Concentrates are exempt from sales and use taxes as sales of food products for human consumption under Conn. Gen. Stat. § 12-412(13).
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 tax under Conn. Gen. Stat. § 12-412(13), which defines food products as including:
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.
The definition of “food products for human consumption” is further elaborated upon by Conn. Agencies Regs. § 12-426-29 to mean all products normally consumed by human beings for nutritive value or taste satisfaction.
The Snacks are meals or snacks containing fiber and protein that are “normally consumed by human beings for nutritive value or taste satisfaction.” Therefore, sales of these products are exempt as sales of food products for human consumption.
The definition of “food products for human consumption” in Conn. Gen. Stat. § 12-412(13) specifically excludes, among other items, “tonics or preparations in liquid, powdered, granular, tablet and capsule form” that are “sold as dietary supplements or adjuncts.”
As the Concentrates are in the form of chewable tablets and capsules, these products would be excluded from the definition of “food products for human consumption” if “sold as dietary supplements or adjuncts.” Sales of dietary supplements are exempt from sales and use taxes under a different provision than food products, Conn. Gen. Stat. § 12-412(120). For purposes of Conn. Gen. Stat. § 12-412(120), dietary supplements are defined as products, other than cigarettes or tobacco products, intended to supplement the diet of a human or animal that meet the following three requirements:
1. Contain one or more of the following dietary ingredients:
a. A vitamin;
b. A mineral;
c. An herb or other botanical;
d. An amino acid;
e. A dietary substance for use to supplement the diet by increasing the total dietary intake; or
f. A concentrate, metabolite, constituent, extract, or combination of any ingredient described in above.
2. Are intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, are not marketed as conventional food and are not marketed for use as a sole item of a meal or of the diet; and
3. Are required to be labeled as a dietary supplement, identifiable by the “Supplement Facts” box found on the label and as required pursuant to Title 21 of the Code of Federal Regulations § 101.36.
Special Notice 2015(1), Sales and Use Tax Exemption for Nonprescription Drugs and Medicines.
Although the Concentrates are in the form of chewable tablets or capsules, they do not qualify as “dietary supplements” because they are not marketed as a dietary supplement and are not labeled with the “Supplement Facts” box. Instead, the Concentrates bear the “Nutrition Facts” box. The United States Food and Drug Administration is responsible for assuring that foods sold in the United States are safe, wholesome and properly labeled, pursuant to federal laws that require most foods to bear a “Nutrition Facts” box.
The Concentrates are whole fruits, vegetables and grains that have been converted into a powdered form, then incorporated into chewable tablets and capsules. The Company markets the Concentrates not as multivitamins, medicine, treatments or cures for any disease, but rather as natural nutrients to be consumed for nutritive value, which is consistent with the products being labeled with the “Nutrition Facts” box. For these reasons, the Concentrates are considered food products, and are not considered dietary supplements for purposes of the exclusion from food products set forth in Conn. Gen. Stat. § 12-412(13). Therefore, sales of the Concentrates are exempt as sales of food products for human consumption.
OFFICE OF COUNSEL
April 29, 2016
U.S. Food and Drug Administration, Guidance for Industry: A Food Labeling Guide, www.fda.gov/Food/
GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/LabelingNutrition/ucm2006828.htm (last visited April 29, 2016).