Was freeze-dried ANABAENA Flos Aqua exempt when labeled as pure blue-green-algae food rather than a dietary supplement?

Plain-English summary

ANABAENA Flos Aqua was a freeze-dried product made of pure premium blue-green algae. Its label presented it as a pure-food product and listed naturally chelated vitamins, minerals, lipids, nucleic acids, chlorophyll, amino acids, and enzymes.

Regulation 1602 treated unusual foods such as seaweed as exempt unless their labels said they were food supplements or the equivalent.

Because the submitted ANABAENA label did not make dietary-supplement claims, tax counsel classified the product as exempt food.

The official PDF has an internal date inconsistency: page one and the annotation say November 16, 1981, while page two's footer says January 24, 1992. The matching first-page and annotation date is used here. A later official note also says medicinal claims are no longer used to distinguish food from medicine; the annotation was amended in 2010.

Common questions

Did the vitamins, minerals, and other nutrients make the algae taxable?

No. The source treated it as unusual food because the label did not present it as a dietary supplement.

What label change would have altered the stated result?

A claim that the product was a food or dietary supplement or equivalent.

Why does this page use 1981 despite the 1992 footer on page two?

The letter's first page and the official annotation both identify November 16, 1981. The conflicting page-two footer is disclosed as an internal source mismatch.

Citations and references

• California Sales and Use Tax Regulation 1602 — as cited and extensively quoted; stated copy not reproduced in the official PDF
• Annotation 245.0724 (11/17/08) — cited in the later official note concerning medicinal claims
• Redacted company president's October 8, 1981 letter requesting tax guidance for ANABAENA Flos Aqua — referenced; not reproduced in the official PDF
• ANABAENA Flos Aqua freeze-dried pure premium blue-green algae label and naturally chelated vitamins, minerals, lipids, nucleic acids, chlorophyll, amino acids, and enzymes — facts described; formula, ingredient specifications, complete label, package, sample, nutrient analyses, manufacturing records, invoices, and sales records not reproduced in the official PDF
• Official first-page and annotation date of November 16, 1981; the continuation-page header instead prints January 24, 1992 — unresolved internal source conflict; page uses the matching formal first-page and annotation date
• Annotation 245.1122's later medicinal-claim note and 2010-1 amendment notation — published with the official sources; no amendment file, rulemaking record, or supporting material 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/245-1122.pdf

Original ruling text

245.1122

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-3237

November 16, 1981

Mr. [C]
President
--- --- --XXXX -----, CA XXXXX
S- -- XX-XXXXXX
Dear Mr. [C]:
This is in reply to your letter of October 8, 1981. You have requested our opinion concerning the correct application of tax to your sales of ANABAENA Flos Aqua. Specifically, your inquiry concerns whether or not this product qualifies as an exempt “food product” under Sales and Use Tax regulation 1602. As we understand it, ANABAENA Flos Aqua is a freeze dried product consisting of pure premium blue-green algae. It is labeled as a pure-food product and contains naturally chelated vitamins, minerals, lipids, nucleic acids, chlorophyll, amino acids and enzymes. Sales and Use Tax Regulation 1602, “Food Products,” (copy enclosed) provides that tax does not apply to the sale of food products for human consumption. It further provides that the term “food products” does not include: “any product for human consumption in liquid, powdered, granular, tablet, capsule, lozenge, or pill form (A) which is described on its package or label as a food supplement, food adjunct, dietary supplement, or dietary adjunct, and to any such product (B) which is prescribed or designed to remedy specific dietary deficiencies or to increase or decrease generally one or more of the following areas of human nutrition: 1. 2. 3. 4.

Vitamins
Proteins
Minerals
Caloric intake

Mr. [C]

-2-

January 24, 1992
245.1122

In determining whether a product falls within category (B), it is important whether the manufacturer has specially mixed or compounded ingredients for the purpose of providing a high nutritional source. For example, protein supplements and vitamin pills are taxable as food supplements. Other items, such as cod liver oil, halibut liver oil, and wheat germ oil, are considered dietary supplements and thus subject to tax even though not specially compounded. However, unusual foods such as brewer’s yeast, wheat germ and seaweed are not subject to tax except when their label states they are a food supplement or the equivalent. Finally, the compounding of nutritional elements in items traditionally accepted as food does not make them taxable, e.g., vitaminenriched milk and high protein flour.” (Emphasis added.) To the extent the label of the type of ANABAENA Flos Aqua you sell does not purport to make any claims as a dietary supplement, we would consider ANABAENA Flos Aqua to fall within the definition of a “food product” as that term is used in regulation 1602. As such, tax would not apply to your sales of ANABAENA Flos Aqua. If you have further questions concerning this matter, please write this office. Very truly yours,

Mary C. Armstrong
Tax Counsel
MCA:ba
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.