Were liqueur-filled chocolates exempt candy when their labels said sales to underage buyers were unlawful?

Plain-English summary

The requester submitted two liqueur-filled chocolate products: Splendid Chocolates Cointreau Liqueurs in Dark Chocolate and Very Special Chocolats Chocolate Cocktails.

Both products contained alcohol, and each label warned that selling the product to someone below the legal age for alcoholic beverages was unlawful.

Candy and confectionery were generally exempt food products, but Regulation 1602 excluded spirituous, malt, and vinous liquors. Senior Tax Counsel Mary C. Armstrong concluded that the two chocolates contained enough alcohol to be considered alcoholic beverages.

They therefore did not qualify for the food exemption, and their sales were taxable.

Common questions

Were the products still candy or confectionery?

They could meet that general description, but the alcoholic-beverage exclusion controlled their tax treatment.

What evidence showed that the alcohol level mattered?

Each product carried a warning that sale to a person below the legal drinking age was unlawful, and counsel found the products contained enough alcohol to be alcoholic beverages.

Does every candy containing flavoring associated with liqueur have this result?

No. The source addressed these two products and their actual alcohol content and labels.

Citations and references

• California Revenue and Taxation Code section 6359 (as cited)
• California Sales and Use Tax Regulation 1602 — cited for the food-product rule and liquor exclusion
• California Sales and Use Tax Regulation 1620 — printed in the concluding product-specific sentence; unresolved conflict with the earlier Regulation 1602 references
• Redacted training coordinator's November 14, 1989 letter requesting tax guidance for liqueur-filled candy — referenced; not reproduced in the official PDF
• Splendid Chocolates Cointreau Liqueurs in Dark Chocolate and Very Special Chocolats Chocolate Cocktails — products submitted and alcohol and underage-sale label facts described; products, formulas, ingredient and alcohol specifications, laboratory results, labels, packages, samples, invoices, and sales records not reproduced in the official PDF
• Legal age and law making underage sale of the products unlawful — label warning described without a statute, regulation, or other formal citation
• 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/245-0652.pdf

Original ruling text

245.0652

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 324-5589

January 5, 1990

Ms. J--- M. C--Training Coordinator
S--- T--- C--XXXXX --- -----, CA XXXXX

S- -- XX-XXXXXX
Dear Ms. C---:
This is in response to your letter of November 14, 1989. You have requested our opinion regarding the correct application of tax to the following liqueur-filled candy. Splendid Chocolates – Cointreau, Liqueurs in Dark Chocolate Very Special Chocolats, Inc. – Chocolate Cocktails Both of the products you submitted contain alcohol. Each is labeled with the proviso that the sale of the product to a person under the legal age for purchasing alcoholic beverages is unlawful. Generally, the sales of “candy and confectionary” for human consumption are sales of exempt food products which are exempt from tax pursuant to Revenue and Taxation Code section 6359 and Sales and Use Tax Regulation 1602. However, Regulation 1602 also provides that the term “food products” does not include “spirituous, malt or vinous liquors.” We are of the opinion that neither of these liqueur products qualify as exempt food products under Sales and Use Tax Regulation 1620 because they both contain sufficient amounts of alcohol to be considered an alcoholic beverage. As such, tax will apply to your sale of these products.

Ms. J--- M. C---

-2-

January 5, 1990
245.0652

If you have further questions concerning this matter, please write this office again. Very truly yours,

Mary C. Armstrong
Senior Tax Counsel

MCA:wak