Sales Tax Secrets: Energy Drinks
Do you know what you're drinking?
Perhaps some of the most highly scrutinized products by auditors and the FDA alike are energy drinks. While their popularity seems to have reached its maximum potential, new formulas to feed the urge are constantly hitting the market. With new formulas come new ingredients, and, until those ingredients have been fully evaluated by the FDA, they are considered dietary supplements and not food, which effects taxability in many states. With that in mind, here's a look at a few of the favorites and their journeys to becoming real live food.
Red Bull wins the popularity contest. On top of being the most widely sold energy drink in the world, it's been around as long as I have, which may not make it Coca-Cola, but it's nothing to sneeze at. It also has a nutrition label and is therefore taxed like any other soda. Taurine is the thing that puts the "bull" in Red Bull, but it may not be what you expect. Taurine is an acid naturally produced in the body and an important component in bile among other things.
Monster is in the process of crossing over from using a supplement label to a nutrition label. That means that in some markets Monster will be taxed differently than others, depending on which label your inventory happens to have. So if your business sells Monster, make sure you pay attention to the label and how it is taxed in your jurisdictions. The same goes for Rock Star. Whichever way you choose to freak out, keep an eye on that label.
5 Hour Energy
5 Hour Energy shots have a supplement label. Many shot-sized drinks do, but it's important when considering sales tax to ask what the purpose of the drink is. If it's intended to deliver vitamins, different tax rules may apply than if it is intended strictly to give people an energy boost. For example, in New York, supplements are exempt with the exception of those intended to be energy drinks.
In sum, how an energy drink is packaged and marketed can make all the difference in how it is taxed.
The 2021 sales tax changes report: midyear update
Your guide to navigating the complicated world of tax compliance and preparing for the future
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