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California: Ingredients Impact Taxability


 California: the taxability of food often depends on the ingredients.

Savvy shoppers read labels. The gluten intolerant check for hidden wheat. Heart patients scan for sodium and trans fats. Concerned moms look for high fructose corn syrup lurking in breads, peanut butter and jams.

Checking ingredients is also essential for anyone interested in sales tax, since many states use ingredients to determine the tax rate of food products. In Maine, for example, the first ingredient determines whether or not a food is a grocery staple or a confection; confections (which start with a sugary ingredient) are subject to sales tax; grocery staples are exempt.

Not everyone realizes this, and while it may not be interesting for the average shopper, it is essential knowledge for businesses that sell food.

Ensure

With education in mind, the State Board of Equalization (BOE) has released an information bulletin on the subject of Ensure™ food products and nutritional supplements. Ensure shakes and nutrition powders are, according to the website, "a source of complete, balanced nutrition® ." They are often recommended for people who are not getting the vitamins, minerals and calories they need.

According to the BOE:

"When buying products, such as Ensure™, it is important to read the label to help determine if it is a food product or a food supplement. Changes made to a product label can result in sales of the product being subject to tax or not…. The details of the labeling, in addition to the form of the product, are what we use to determine if an item qualifies as a food product or a food supplement…."

In California, sales tax applies when a product is:

  • "In liquid, powdered, granular, tablet capsule, lozenge, or pill form;
  • Described on its label or package as a food supplement, food adjunct, dietary supplement or dietary adjunct; or
  • Prescribed or designed to remedy specific dietary deficiencies or to increase or decrease generally those areas of human nutrition dealing with vitamins, proteins, minerals or calories."

Exempt products

The following products meet the definition of a nontaxable food product so they are currently not subject to sales tax in California:

  • Ensure™;
  • Ensure Plus™; and
  • Glucerna™.

Taxable products

Don't assume that all Ensure™ products are exempt. The following products are defined as food supplements and are currently subject to sales tax in California:

  • Ensure Bone Health™;
  • Ensure Immune Health™;
  • Ensure Muscle Health™; and
  • Ensure High Protein™.

Be vigilant

You now have a list of taxable and exempt Ensure products, but it's important to remain vigilant. The ingredients for these products are subject to change. And a new list of ingredients, or even a new order of ingredients, can trigger changes in taxability.

Who checks your labels?

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photo credit: dno1967b via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.