Did a tobacco-free herbal chew qualify for the food exemption merely because consumers chewed it like gum?

Plain-English summary

A seller argued that its herbal chew was exempt because it contained no tobacco. It supplied no meaningful product description beyond that statement.

California presumed retail gross receipts taxable, and the seller had the burden to prove an exemption. Proposition 163 had added gum to the statutory food-product category.

Counsel assumed the herbal chew was not made of gum because the seller did not say otherwise. A product did not become gum merely because consumers chewed rather than swallowed it or because it functioned like gum.

On that limited record, the herbal chew was taxable. The letter invited the seller to provide more product information, making the result expressly dependent on the assumption that the product was not actually gum.

Common questions

Did the absence of tobacco make the product exempt?

No. Tobacco content was not the issue in the food-product analysis.

Why did the gum exemption not apply?

The seller did not establish that the product was made of gum; functional similarity was insufficient.

Was the conclusion unconditional?

No. It rested on sparse facts and an explicit assumption that the product was not gum.

Citations and references

• California Revenue and Taxation Code sections 6051, 6091, and 6359 (as cited)
• California Sales and Use Tax Regulation 1602, including subdivisions (a)(1) and (a)(2) (as cited)
• California Proposition 163, effective December 1, 1992 — as cited; measure text not reproduced in the official PDF
• Market St. Ry. Co. v. California State Board of Equalization (1953), 137 Cal. App. 2d 87, 96, 290 PO.2d 201 — as printed in the official letter
• Standard Oil Co. v. State Board of Equalization (1974), 39 Cal. App. 3d 765, 769, 114 Cal. Rptr. 571
• Redacted seller's July 27, 1993 letter claiming exemption for its tobacco-free herbal chew — quoted and described; not reproduced in the official PDF
• Herbal-chew identity, tobacco content, gum content, chewing use, and sales — only no-tobacco and chewing facts stated; gum content assumed, with no formula, ingredient specifications, laboratory results, labels, samples, manufacturing records, invoices, or sales records reproduced in the official PDF
• Regulation 1602 enclosure and copy to a redacted district administrator — stated as enclosed or copied; enclosure, copy, and any follow-up not reproduced in the official PDF
• Requested additional product information and possible later sale, audit, assessment, refund claim, appeal, or other agency action — request stated; no response, follow-up, or final outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/245-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/245-0495.pdf

Original ruling text

245.0495

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
LEGAL DIVISION (MIC:82)

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

October 19, 1994

────────
BURTON W. OLIVER
Executive Director

Mr. [H]
XXXX --- -----, California XXXXX
Re:

S- -- XX-XXXXXX
Non-tobacco Chew

Dear Mr. [H]:
I am responding to your letter to the Legal Division dated July 27, 1993. You indicate your belief that sales of your product, [G] are exempt from tax. You state that the product is “an herbal chew and it contains absolutely no tobacco.” OPINION A.

Sales and Use Tax Generally.

In California, except where specifically exempted by statute, Revenue and Taxation Code Section 6051 imposes an excise tax, computed as a percentage of gross receipts, upon all retailers for the privilege of selling tangible personal property at retail in this state. (Unless otherwise stated, all statutory references are to the Revenue and Taxation Code.) “[I]t shall be presumed that all gross receipts are subject to tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale ...” (§ 6091.) “Exemptions from taxation must be found in the statute.” (Market St. Ry. Co. v. Cal. St. Bd. of Equal. (1953) 137 Cal.App.2d 87, 96 [290 PO.2d 201.]) “The taxpayer has the burden of showing that he clearly comes within the exemption.” (Standard Oil Co. v. St. Bd. of Equalization (1974) 39 Cal.App.3d 765, 769 [114 Cal.Rptr. 571].)

Mr. [H]

B.

-2-

October 19, 1994
245.0495

Food Products Exemption.

Section 6359, as interpreted and implemented by Regulation 1602, provides an exemption from sales and use taxes for sales of food products for human consumption under certain circumstances. Sub-divisions (1) (2) of Regulation 1602(a) contain lists of products which, either singly or in combination, are considered “food products.” (Sales and Use Tax Regulations are Board promulgations which have the force and effect of law.) As amended by Proposition 163, effective December 1, 1992, the term “food products” includes gum. C.

Tax Consequences.

You do not include a description of the product itself beyond stating than it contains no tobacco. We assume that it is not made of gum because you do not indicate that it is. While it may, be chewed and not swallowed, it is not gum. The statute specifically includes gum within the list of food products items, but not products that are functionally like gum. Under the above authority, the Board cannot classify something as gum that is not gum. Therefore we conclude that your sales of [G] herbal chews are subject to tax. For your information, I have included a copy of Regulation 1602. I hope the above discussion has answered your question. If you have additional information regarding your product, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel

JLW:es
Enclosure:
cc:

Reg. 1602

-- - District Administrator