Illinois: Taxation of Dietary Supplements, Food Replacement
- Nov 20, 2012 | Gail Cole
With the great Thanksgiving Feast on the horizon, now seems a good time to talk about the taxation of dietary supplements and food replacements. While most folks will indulge the appetite on Thursday, many will seek to suppress it come Friday. In Illinois, at least, we now know just how dietary supplements and food replacements are taxed.
The Illinois Department of Revenue has released a Letter Ruling on the taxation of dietary supplements and food replacements. A company that manufactures these items wished to know if two of its products "qualify for sales tax exemption."
The Department of Revenue responded with the following reminders:
- "Food sold at retail in Illinois is subject to Retailer's Occupation Tax and Use Tax. … at the low State rate of 1%."
- "Food that is to be consumed off the premises where it is sold (other than alcoholic beverages, candy, soft drinks, and food that has been prepared for immediate consumption) is taxed at the rate of 1% plus applicable local taxes."
- "Food is defined as any solid, liquid, powder or item intended by the seller primarily for human internal consumption, … including foods such as condiments, spices, seasonings, vitamins, bottled water… ."
Applicable Illinois Administrative Code makes the following distinctions:
"… [A]ny complete, finished, ready-to-use, non-alcoholic drink, whether carbonated or not, including but not limited to soda water, cola, fruit juice, vegetable juice, carbonated water, and all other preparations commonly known as soft drinks of whatever kind or description that are contained in any closed or sealed bottle, can, carton, or container regardless of size.
Not Soft Drinks
"… [C]offee, tea, non-carbonated water, infant formula, milk or milk products as defined in Section 3(a)(2) and (4) of the Grade A Pasteurized Milk and Milk Products Act..., or drinks containing 50% or more natural fruit or vegetable juice. ... Frozen concentrated fruit juice, dry powdered drink mixes and fruit juices that are reconstituted to natural strength are not soft drinks."
If a dietary supplement or food replacement falls under the definition of soft drink in Illinois, it is taxed at the higher state sales tax rate of 6.25% (86 Ill. Adm. Code (d) (6)).
If a dietary supplement is not defined as a soft drink and falls under the definition of food sold at retail, it is subject to the low state sales tax rate of 1.%
The moral of this story? If you don't know how to tax it, maybe you shouldn't eat it.