Were Shaklee Energy Bars exempt when other Shaklee meal and protein mixes in the same review could be taxable?

Plain-English summary

Board staff reviewed Shaklee Meal Shakes, Instant Protein Drink Mix, Slim Plan Drink Mix, and an Energy Bar wrapper supplied by distributors.

Tax counsel said food bars had previously been treated like candy, which Regulation 1602(a)(1) listed as a food product. The Energy Bar was also outside Regulation 1602(a)(5)'s special rule for liquids, powders, granules, tablets, capsules, lozenges, and pills.

The Energy Bar's sales were therefore exempt. Its result differed from the powdered products: Slim Plan Drink Mix was taxable because it was for weight loss or maintenance, and Instant Protein Drink Mix became taxable after its label changed to say “food supplement only.” The incomplete Meal Shake information supported only a conditional conclusion.

The memorandum separately warned that the company had previously been treated as the retailer under section 6015. If the distributors added sales tax themselves, that could create an excess-tax-reimbursement issue.

The official annotation marks this entry “AM 2017.” The underlying opinion date remains November 26, 1990.

The Meal Shake discussion is not a reliable separate holding: the label was incomplete, and the PDF's stated condition conflicts with the quoted supplement rule. This page does not resolve that source defect.

Common questions

Did the bar's energy or meal-related marketing make it taxable?

No. Counsel treated its food-bar form as outside the listed supplement forms.

Why were some drink mixes treated differently?

They were powders, and their weight-loss or food-supplement labeling triggered the cited exclusion.

Who was treated as the retailer in the direct-sales structure?

The memorandum said the Board had previously ruled under section 6015 that Shaklee—not its distributors—was the retailer for property sold through representatives with distributors.

Citations and references

• California Revenue and Taxation Code sections 6015, 6359(a), and 6369 (as cited)
• California Sales and Use Tax Regulation 1602 (including subdivisions (a)(1), (a)(2), and (a)(5)) (as cited)
• Federal Food and Drug Administration regulations establishing listed vitamin and mineral minimum daily requirements — quoted through Regulation 1602(a)(5) without a separate federal citation
• Jean McNeil's October 9, 1990 memorandum requesting advice and an earlier request for further information — memoranda and request referenced but not reproduced in the official PDF
• Product-description portions for Shaklee Meal Shakes, Instant Protein Drink Mix, and Slim Plan Drink Mix, plus a complete Energy Bar wrapper — materials referenced and quoted in part but not reproduced in the official PDF
• Packet message apparently from Shaklee headquarters quoting part of Staff Counsel Mary C. Armstrong's August 9, 1982 letter about Instant Protein Drink Mix — message and complete letter not reproduced in the official PDF
• Prior Board ruling treating Shaklee as the retailer under section 6015 — ruling referenced without an identifier, date, text, or supporting record
• Prior Board consideration treating food bars like candy under Regulation 1602(a)(1) — position referenced without an identifying opinion, date, or supporting record
• Four reviewed Shaklee product categories and their supplied labeling and nutrition evidence — outcomes described; complete boxes, labels, wrapper, ingredients, formulas, samples, tests, invoices, distributor agreements, tax-reimbursement records, and sales records not reproduced in the official PDF
• Official Annotation 245.1205's 2017 amendment notation — amendment details and underlying record not supplied on the annotation page or in the official PDF
• Possible later product sale, excess-tax-reimbursement proceeding, 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/245-1205.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

245.1205

Memorandum
To:

Ms. Jean McNeil

From:

John L. Waid
Tax Counsel

Subject:

K--- and V--- B--SR -- XX-XXXXXX

Date:

November 26, 1990

Your memo of October 9, 1990, to the Legal Unit has been referred to me for a response. You have requested advice as to whether the taxpayers’ products are subject ot sales tax. The taxpayers appear to be [X] distributors. In response to your previous request for further information, they sent portions of product descriptions from boxes of [X] Meal Shakes, Instant Protein Drink Mix, and Slim Plan Drink Mix, and a whole Energy Bar wrapper. The Instant Protein Drink label states as follows: Notice: Use this product as a food supplement only. Do not use for weight reduction. [X] recommends the clinically tested Slim Plan products for weight loss or mainenance.” The packet also included a message, apparently from [X] headquarters, quoting a portion of a letter from Staff Counsel Mary C. Armstrong dated August 9, 1982, concluding as follows: “[X] Instant Protein Drink Mix qualifies as a ‘food product’ as that term is used in Sales and Use Tax Regulation 1602 because it is not described on its label as a food supplement, food adjunct, dietary supplement, or dietary adjunct, and its label does not make any medicinal or weight loss claims. As such, tax does not apply to your sale of this product.” Also note that, pursuant to Section 6015, the Board has previously ruled that [X] is the retailer of tangible personal property sold through salesmen or representatives who have distributors. If these taxpayers are distributors and are adding sales tax to their sales, there is an excess tax reimbursement problem. Revenue and Taxation Code Section 6359(a), interpreted and implemented by Regulation 1602, provides an exemption from sales and use taxes for the sales of food for human consumption. Regulations 1602(a)(1) & (2) contain a list of products which, either singly or in combination, are considered “food products.” Regulation 1602(a)(5), however, excludes certain items from the definition of “food products” as follows:

Ms. Jean McNeil

-2-

November 26, 1990
245.1205

(5)
“Food products” do not include any product for human consumption in liquid, powdered, granular, tablet, capsule, lazenge, 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 mor of the following areas of human nutrition: 1. 2. 3. 4.

Vitamins
Proteins
Minerals
Caloric intake.”

Regulation 1602(a)(5), subsequently, however, restricts the 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 use 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 providing the user with the following: 1. 2. 3.

70 grams of high quality protein
900 calories
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.”

Based on the above standard, I conclude as follows:
(1)
Slim Plan Drink Mix: This is a powdered drink mix. The label is incomplete, but the High Protein Drink Mix label states that the Slim Plan products are to be used for weight loss or maintenance. Thus, tax applies to the sales of this product. (2) Energy Bar: We have previously considered that food bars are like candy bars which are listed as a “food product” in Regulation 1602(a)(1). Because the Energy Bar is no one of this forms of food products to which the strictures of Regulation 1602(a)(5) apply, it sales are exempt from tax.

Ms. Jean McNeil

-3-

November 26, 1990
245.1205

(3)
[X] Meal Shakes: This is a powdered drink mix for which a complete label was unfortunately not supplied. However, the nutritional information which was given indicates that the Meal Shakes supply, if used as a meal substitute for all three meals, a substantial amount of calories and protein (510 and 31.5 grams, respectively) and almost 100% of the RDA of various vitamins and minerals. These products would be considered as a “food products” if the remainder of the label does identify them as food supplements, etc. (4) Instant Protein Drink Mix: This powdered drink mix is clearly labeled as a “food supplement only.” The prior opinion partially quoted by the taxpayer unmistakably states that this product’s sales were tax-exempt because it was not labeled a “food supplement”. In view of this change in the facts, we reverse our earlier opinion and conclude that sales of this product are now subject to tax.

JLW:es