When did Knox Gelatine Drink become exempt after previously being treated as a taxable food supplement?

Plain-English summary

Knox Gelatine Drink fit competing categories. It was a beverage containing some fruit juice flavoring and gelatin, both food characteristics. But its package also promoted it to people with nail problems and emphasized supplementary protein and vitamin C.

Tax counsel called the question close. He ultimately concluded that users would consume it regularly to provide components of a normal diet, rather than as a supplement.

The product was moved from the taxable list to the exempt list. The accompanying response made the timing explicit: Knox Gelatine Drink was exempt beginning January 1, 1970, but remained taxable for earlier periods.

Common questions

Why was the classification close?

The product looked both like an exempt gelatin beverage and like a product promoted for supplementary nutritional or medicinal qualities.

What reasoning supported exemption?

Counsel treated its regular-diet use, gelatin content, and beverage character as controlling.

Was the exemption retroactive?

No. The source says it applied from January 1, 1970; earlier periods remained taxable.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• Former California Sales and Use Tax Ruling 52, including subdivisions (a)(1) and (a)(4) (as cited)
• Webster definition of beverage as “liquid for drinking” — quoted without a dictionary edition or page
• Code amendments effective January 1, 1970 — relied on without act, chapter, bill, or section identification in the official PDF
• Prior ruling classifying Knox Gelatine Drink as a taxable food supplement before January 1, 1970 — described without a ruling number or copy in the official PDF
• Evaluation & Planning's March 11, 1970 referral of the redacted requester's March 9 letter — referral and letter referenced; neither reproduced in the official PDF
• Knox Gelatine Drink package and product — fruit-juice flavoring, gelatin, nail-problem use, protein, vitamin C, and promotional language described; package copy, label, formula, ingredient specifications, sample, tests, invoices, and sales records not reproduced in the official PDF
• Taxable and exempt product lists — reclassification directed; lists, implementation record, and copy-distribution record not 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/245-0640.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Evaluation & Planning (RI)

From:

Tax Counsel (LAA)

Subject:

[X]

245.0640

Date:

March 24, 1970

On March 11, 1970 you forwarded a letter from “B” and asked that I reply to it. You will receive a copy of the reply, but I thought a more complete explanation was in order. Revenue and Taxation Code Section 6359 defines “food products” to include “all fruit juices, vegetable juices, and other beverages except bottled water, spirituous, malt or vinous liquors or carbonated beverages, whether liquid or frozen.” Ruling 52 expands slightly on that definition by adding the phrase “including all beverages composed in part of fruit or vegetable juice.” Beverage is defined by Webster simply as “liquid for drinking.” Section 6359 and Ruling 52(a)(4) go on to provide, however, that “food products” do not include “Medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.” In Knox Gelatine Drink we find a product which fits both the definition of an exempt beverage and a taxable dietary supplement. On the one hand, it is a beverage; and it apparently contains some fruit juice in its natural flavoring. It also is gelatine, which is separately defined by Ruling 52(a) (1) as a food product. On the other hand, it is intended to be used by persons who have nail problems as an alternative and more pleasant way of taking in gelatine. It is so described on its package, and in addition emphasizes the supplementary protein and vitamin C which is supplied by the product. I doubt if anyone would choose to drink it merely for its beverage qualities, but rather it would only be consumed by those who desired its medicinal qualities.

Evaluation & Planning

-2-

March 24, 1970
245.0640

There is no clear cut answer. My feeling, however, is that persons utilizing Knox Gelatine Drink will do so as a regular part of their diet to provide the essential components of a normal diet. Used as such, it would not be a supplement. As gelatine, it is exempt. All beverages are exempt with certain specific exceptions not applicable. Accordingly, it is my conclusion that Knox Gelatine Drink should be removed from the taxable list and placed on the exempt list.

LAA:ph

[lb]

245.0640

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 24, 1970

Dear Mr. [X]:
This is in response to your letter of March 9 asking whether Knox Gelatine Drink was an exempt food product. While the question is a close one, it is my conclusion that amendments to the code effective January 1, 1970 require that the product be classified as exempt beginning on that date. Prior to January 1, 1970 it had been ruled a taxable food supplement, and it should be considered taxable for all periods prior to that date. Very truly yours,

Lawrence A. Augusta
Tax Counsel

LAA:ph [lb]