Did herbal-food products lose California's food exemption because new FDA rules prevented nutritive-value claims?

Plain-English summary

A seller was concerned that new FDA rules prevented nutritive-value claims for herbal-food combinations and asked whether that change made its sales taxable in California.

Tax counsel said California did not require a particular nutritive claim before an item could be treated as food for human consumption. Changes in federal labeling definitions therefore did not by themselves change the California sales-tax result.

The supplied label neither called the product a dietary supplement or adjunct nor claimed medicinal properties. Under the 1994 analysis, the herbal-food products qualified as food for human consumption and their sales were exempt under Regulation 1602.

The official PDF later adds that medicinal claims on a label are no longer used to distinguish food from medicine and refers readers to Annotation 245.0724. That later note supersedes one part of the original label analysis; it does not provide a new product-specific classification under current labeling or law.

Common questions

Did California require the seller to make nutritive-value claims?

No. The opinion said no particular nutritive claim was required for food treatment under California law.

Why did the 1994 opinion exempt the products?

The supplied label did not designate them as dietary supplements or adjuncts, and counsel treated them as food for human consumption under section 6359 and Regulation 1602.

Do medicinal label claims still decide whether a product is medicine?

No. The later note in the official source expressly says that test is no longer used.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• California Sales and Use Tax Regulation 1602 (as cited)
• Sales and Use Tax Annotation 245.0500 and prior Legal staff opinion letters — as cited; the source describes annotations as excerpts that guide staff positions
• Annotation 245.0724 (11/17/08) — cited in the later official note concerning medicinal claims
• New federal Food and Drug Administration regulations and changed definitions concerning nutritive-value claims — described without a formal citation; regulation text not reproduced in the official PDF
• Redacted seller's December 9, 1993 letter asking about herbal/food combinations and sales tax — referenced; not reproduced in the official PDF
• Herbal/food-combination label enclosed with the seller's letter — claim language described; label copy, formula, ingredient specifications, package, sample, invoices, and sales records not reproduced in the official PDF
• Sales and Use Tax Regulation 1602 enclosure — stated as included; enclosure copy not reproduced in the official PDF
• Annotation 245.0499'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
• Official first-page and annotation date of January 31, 1994; the continuation-page header instead prints January 28, 1994 — unresolved internal source conflict
• 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/245-0499.pdf

Original ruling text

245.0499

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

January 31, 1994

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

Mr. [B]
--- --P.O. Box XX
--- ---, California XXXXX

Re:

SR -- XX-XXXXXX
Herbs as Foods

Dear Mr. [B]:
The State Board of Equalization has requested the Legal Division to respond to your letter to it of December 9, 1993. I apologize for the delay. I only just received your letter. You indicate that you are in the business of selling herbal/food combinations. You are concerned that new FDA regulations require that sellers of herbal/food combinations can make no claims of nutritive value for these products. You ask if you need to pay sales tax on your sales of these products. OPINION Under California law, no particular claims of nutritive value are required for an item to be considered a food for human consumption. Changes in FDA definitions thus have no impact on California sales and use tax law. We have previously determined that herbal products the labels of which make no medicinal claims or designate the product as a food supplement or adjunct are food products under Revenue and Taxation Code Section 6359. (Annot. 245.0500. Sales and Use Tax Annotations are excerpts from previous Legal staff opinion letters and serve as a guide to staff positions.)

Mr. [B]

-2-

January 28, 1994
245.0499

You enclosed a label with your letter. The label does not claim medicinal properties for the product nor call it a dietary supplement or adjunct. Therefore, the herbal/food products you sell are foods for human consumption the sales of which are exempt from sales and use tax under Regulation 1602. For your information, I have included 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:

Reg 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.