Was the Edge Bar exempt after Proposition 163 repealed California's temporary snack-food exclusion?

Plain-English summary

The Edge Bar was a food bar supplying 234 calories, 25 percent of the minimum recommended daily allowance of protein, and varying percentages of vitamins and minerals. Its marketing emphasized protein and balanced carbohydrates.

Regulation 1602(a)(5) applied only to products in specified forms such as liquids, powders, tablets, capsules, lozenges, and pills. A food bar was not one of those forms, so that supplement exclusion did not remove it from the food category.

California had temporarily treated food bars as taxable fabricated snack foods. The letter says section 6359(c)(2) became effective July 15, 1991, but later identifies the taxable period as July 15, 1992 through November 30, 1992. The source does not resolve that one-year conflict. Proposition 163 repealed the snack-food exclusion effective December 1, 1992.

Because the opinion was issued after that repeal took effect, counsel concluded that Edge Bar sales were not taxable. The letter also states that food bars were nontaxable before the earlier snack-food period.

Common questions

Did the bar's protein and carbohydrate marketing make it taxable as a supplement?

No. Regulation 1602(a)(5) did not apply because a food bar was not one of its listed product forms.

Why did the December 1992 timing matter?

Proposition 163 ended the temporary snack-food exclusion on December 1, 1992, restoring nontaxable treatment for food bars.

Would the source have treated the same bar as taxable during the temporary period?

Yes. The letter says food bars were taxable during the historical period it identifies as July 15 through November 30, 1992, although an earlier paragraph gives July 15, 1991 as the exclusion's effective date.

Citations and references

• California Revenue and Taxation Code sections 6051, 6091, 6359 (including subdivision (c)(2)), and 6369 (as cited)
• California Sales and Use Tax Regulations 1602 (including subdivisions (a)(1), (a)(2), (a)(4)(B)1, and (a)(5)) and 1603 (as cited); the conclusion prints Regulation 1602(b)(5), conflicting with the earlier subdivision references
• California Proposition 163 — cited as repealing the snack-food exclusion effective December 1, 1992
• Market St. Ry. Co. v. California State Board of Equalization (1953), 137 Cal. App. 2d 87, 96, source-printed 290 PO.2d 201
• Standard Oil Co. v. California State Board of Equalization (1974), 39 Cal. App. 3d 765, 769, 114 Cal. Rptr. 571
• Federal Food and Drug Administration regulations establishing listed vitamin and mineral minimum daily requirements — quoted through Regulation 1602 without a separate federal citation
• Redacted company representative's November 18, 1992 letter asking about Edge Bar sales — request referenced but not reproduced in the official PDF
• Edge Bar flyer, two samples, and packages supplied for review — materials referenced and quoted in part but not reproduced in the official PDF
• Edge Bar product evidence, including 234 calories, 25 percent of minimum protein RDA, varying vitamin and mineral percentages, and protein and carbohydrate claims — facts supplied; complete flyer, packages, labels, ingredients, formula, samples, tests, 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
• Official Annotation 245.1203's 2017 amendment notation and source-printed “food object” and “dietary object” wording — amendment details and underlying record not supplied on the annotation page or 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/245-1203.pdf

Original ruling text

245.1203

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 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

December 14, 1992
BURTON W. OLIVER
Executive Director

Mr. [O]
[N]
XXX --- --- -----, California XXXXX
Re:

S- -- XX-XXXXXX
Edge Bar

Dear Mr. [O]:
I am responding to your letter to the Legal Division dated November 18, 1992. You asked if sales tax applies to your company’s sales of a product known as the Edge Bar. You sent a flyer describing the product as well as two samples. The Edge Bar appears to be a food bar. One bar supplies 234 calories, 25% of the minimum RDA of protein, and varying percentages of other vitamins and minerals. The flyer and the packages state that the Edge Bar supplies “High efficiency protein with Branched Chain Amino Acids” and “Balanced simple and complex carbohydrates....” OPINION A.

Sales and Use Tax Generally.

In California, except where specifically exempted by statute, Revenue and Taxation Code Section 6051 imposes an excise tax, computed as a percentage of gross receipts, upon all retailers fort the privilege of selling tangible personal property at retail in this state. (Unless otherwise stated, all statutory references are to the Revenue and Taxation Code.) “[I]t shall the presumed that all gross receipts are subject to tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale ...” (§ 6091.) “Exemptions from taxation must be found in the statute.” (“Market St. Ry. Co. v. Cal. St. Bd. of Equal. (1953) 137 Cal.App.2d 87, 96 [290 PO.2d 201.] The taxpayer has the burden of showing that he clearly comes within the exemption.” Standard Oil

Mr. [O]

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December 14, 1992
245.1203

Co. v. St. Bd. of Equalization (1974) 39 Cal.App.3d 765, 769 [114 Cal.Rptr. 571].)

Mr. [O]

B.

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December 14, 1992
245.1203

Food Products Exemption

Various statutes, interpreted and implemented by Regulations 1602 and 1603, provide exemptions from sales and use taxes for sales of food products for human consumption under certain circumstances. Subdivisions (1) & (2) of Regulation 1602(a) contain lists of products which, either singly or in combination, are considered “food products.” (Sales and Use Tax Regulations are Board promulgations which have the force and effect of law.) Sub-division (a)(5), however, excludes certain items from the definition of “food products” as follows: “(5) ‘Food products’ do 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. Vitamins
2. Proteins
3. Minerals
4. Caloric intake”
   Regulation 1602 subsequently restricts this limitation on the definition of “food products” as follows: “Tax, however, does not apply to any such products which either are exempted by Section 6369, respecting prescription medicines, or are complete dietary foods providing the user in the recommended daily dosage with substantial amounts of vitamins, proteins, minerals and foods providing adequate caloric intake. An example of the latter is a food daily requirement providing the user with the following:
5. 70 grams of high quality protein
6. 900 calories
7. Minimum daily requirements as established by the regulations of
   the Federal Food and Drug Administration of the following vitamins: A, B1, C, D, Riboflavin, and Niacin or Niacinamide; the following minerals: Calcium, Phosphorus, Iron and Iodine.” In interpreting and implementing the broad provisions of Section 6359(c), Regulation 1602(a)(5) thus 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

Mr. [O]

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December 14, 1992
245.1203

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. Effective July 15, 1991, Section 6359(c)(2) excluded “snack foods” from the list of “food products.” As interpreted and implemented by Regulation 1602(a)(4)(B)1, “snack foods” included items known as “fabricated snacks,” which included food bars. However, the regulation excluded from that definition “meal replacement bars” which contained, per serving as defined by the manufacturer, at least 250 calories and 25% of the minimum RDA of vitamins and minerals. This section was repealed effective December 1, 1992, with the passage of Proposition 163. 3.

Tax Consequences.

Since a “food bar” is not one of the seven forms to which Regulation 1602(b)(5) applies, they are not excluded from the list of “food products” by that section. During the period July 15, 1992, through November 30, 1992, however, food bars were considered to be “fabricated snacks” subject to the exclusion for “snack foods.” During that time period, sales of such products were subject to tax. However, prior to July 15, 1991, and again beginning December 1, 1992, sales of food bars were and are not taxable. 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