Were Nature's Sunshine herb capsules exempt when the reviewed label called them an herbal food combination and did not describe them as dietary supplements or adjuncts?

Plain-English summary

The seller supplied a label for Nature's Sunshine Three, an herbal food combination containing kelp plant, dandelion root, and alfalfa herb. The label did not describe the product as a dietary supplement or adjunct.

Regulation 1602(a)(5) first asked whether a product was in a listed form such as a capsule. If it was, taxation still required supplement or adjunct labeling, or a design aimed at remedying a dietary deficiency or changing vitamin, protein, mineral, or caloric intake.

Tax counsel concluded that capsule form alone did not change the result. Herbal preparations without the covered supplement or adjunct claims were treated as food products, so sales of the described capsules were exempt.

The conclusion for the seller's broader product line was conditional: counsel assumed the supplied label was typical of all herb capsules the seller offered. The official PDF later adds that medicinal label claims are no longer used to distinguish food from medicine, leaving supplement and adjunct treatment as a separate issue.

Common questions

Did capsule form automatically make the products taxable?

No. The source required an additional supplement, adjunct, or covered nutritional-purpose condition.

What label facts supported exemption?

The reviewed label called the product an herbal food combination and did not say it was a dietary supplement or adjunct.

Did counsel inspect every herb-capsule label sold by the requester?

No. The letter expressly assumed that the supplied label was typical of the rest of the product line.

Citations and references

• California Revenue and Taxation Code section 6359(c) (as cited)
• California Sales and Use Tax Regulation 1602(a)(5) (as cited)
• II Business Taxes Law Guide, Annotation 245.0500, and prior Legal Division opinions concerning herbal preparations (as cited)
• Annotation 245.0724 (11/17/08) — cited in the later official note concerning medicinal claims
• Redacted seller's January 13, 1992 letter to the Santa Rosa District asking about herb-product sales — referenced; not reproduced in the official PDF
• Nature's Sunshine Three container label and the seller's broader herb-capsule line — label attached to the request and its product name, kelp, dandelion-root, alfalfa-herb, and claim language described; label copy, formulas, ingredient specifications, packages, samples, invoices, and sales records not reproduced in the official PDF
• Sales and Use Tax Regulation 1602 enclosure — stated as enclosed; enclosure copy not reproduced in the official PDF
• Annotation 245.0498's later medicinal-claim note and the current amended annotation text — published with the official sources; no amendment file or rulemaking record reproduced in the official PDF
• Possible later product sale, audit, assessment, refund claim, appeal, or other agency action — no 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/245-0498.pdf

Original ruling text

245.0498

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3824

February 5, 1992

Ms. [S]
--- --- --- --P. O. Box XXX
--- ---, CA XXXXX
RE:

SR -- XX-XXXXXX
Nature’s Sunshine Herb Capsules

Dear Ms. [S]:
The Santa Rosa District has requested that the Legal Division reply to your letter of January 13, 1992, to the District. As I understand it, you sell certain herb products. You have inquired if these products are food products the sales of which are exempt from sales tax. You attached to your letter a label from a container of these capsules. According to the label, this product, Nature’s Sunshine Three, is an herbal food combination containing kelp plant, dandelion root, and alfalfa herb. The label makes no medicinal claims for the product nor does it state that the product is to be used as a dietary supplement or adjunct. We assume that the lack of claims for use of this product as a medicine or dietary supplement or adjunct on this label is typical of all of the herb capsules that you sell. OPINION In interpreting and implementing the broad provisions of Revenue and Taxation Code Section 6359(c), Sales and Use Tax Regulation 1602(a)(5) sets up a two-step analysis. The threshold question is whether or not the food product under discussion is in one of the enumerated forms – liquid, powdered, granular, tablet, capsule, lozenge, or pill. If so, then its sales are taxable if one of the two following conditions also occurs: (A) its label or package describes it as a food supplement, food adjunct, dietary supplement, or dietary adjunct; or (b) it is prescribed or designed to remedy specific dietary deficiencies or to increase or decrease generally the intake of vitamins, protein, minerals, or calories.

Ms. [S]

-2-

February 5, 1992
245.0498

We have concluded in prior opinions that herbal preparations the labels or packages of which make no claims for the products as being medicines or dietary adjuncts or supplement are food products the sales of which are exempt from tax. (II Bus. Tax. L. Guide, Annot. 245.0500.) We do not consider the fact that the preparations that you sell come in capsules as changing the above result. We have previously determined that herbal preparations in capsule form for which none of the above-mentioned claims are made are “usual foods” within the meaning of Regulation 1602(a)(5). Therefore, your sales of such products are exempt from tax. For your information, I have enclosed a copy of Regulation 1602. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel

JLW:es
Enclosure:

Regulation 1602
A "medicinal claim" on the product label is no longer
used as a basis for differentiating a food product from
a medicine. Please see Annotation 245.0724
(11/17/08). RDT. 7/2/09.