Was Gold's Nutritionalysis 100% Pure Milk/Egg Protein Powder taxable when its label called it a protein drink supplement for muscle building?

Plain-English summary

Gold's Nutritionalysis 100% Pure Milk/Egg Protein Powder was sold over the counter as a powdered drink mix. Its label called it a high-performance protein powder formulated to enhance muscle building and "an excellent protein drink supplement."

Regulation 1602(a)(5) excluded products in powdered and other listed forms when their labels described them as food or dietary supplements or adjuncts, or when they were designed to change protein and other covered nutritional intake.

The product was both powdered and expressly presented as a protein supplement. Tax counsel therefore concluded that it was excluded from the food-product category and that its sales were taxable.

The memorandum evaluated four other Gold's products separately. Their facts and outcomes do not determine this protein powder's result.

Common questions

What label language mattered?

The package described the powder as a muscle-building product and an excellent protein drink supplement.

Did the fact that it contained milk and egg make it exempt food?

No. Its powdered form and supplement labeling controlled the source's analysis.

Did this conclusion classify every Gold's product?

No. The memorandum gave separate product-by-product conclusions.

Citations and references

• California Revenue and Taxation Code sections 6359 (including subdivision (c)) 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)
• Emergency Regulation 1602(a)(4)(B)(1) and a then-current revision concerning meal-replacement bars — draft and revision referenced without their complete text or adoption record
• California Sales and Use Tax Annotation 245.1270 and the prior consideration of similar protein supplements — as cited without a separate supporting opinion
• 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
• F. Abaeze's October 15, 1991 memorandum requesting advice during an audit — memorandum referenced but not reproduced in the official PDF
• Labels and packages supplied for five Gold's Nutritionalysis products — attachments referenced and quoted in part but not reproduced in the official PDF
• Five reviewed product categories: Metabolic Optimizer High Energy Performance Bar, Metabolic Optimizer Formula, 100% Pure Milk/Egg Protein Powder, Weight Loss Powder, and High Performance Weight Gainer Formula — facts and outcomes described; complete labels, packages, ingredients, formulas, samples, tests, invoices, audit workpapers, and sales records not reproduced in the official PDF
• Possible later audit determination, assessment, refund claim, appeal, product change, 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/245-1206.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

Memorandum
245.1206
To:

F. Abaeze
Auditing, Culver City District

From:

John L. Waid
Tax Counsel

Subject:

Food Products (Reg. 1602(a)(5))

Date:

October 29, 1991

The Legal Division has asked me to respond to your memorandum to it of October 15, 1991. You have asked for our opinion regarding the application of sales and use tax to a taxpayer’s sales of certain food products. According to your memorandum, you office is auditing a taxpayer that sells these products over the counter. The taxpayer provides no facilities on the premises for consumption of these products. You attached to your memorandum labels and packages which describe the products. The products are made by Gold’s Nutritionalysis. OPINION A.

Food Products Exemption

Revenue and Taxation code Section 6359, interpreted and implemented by Regulations 1602 and 1603, provides an exemption from sales and use taxes for the sales of food products for human consumption under certain circumstances. Subdivisions (1) & (2) of Regulation 1602(a) 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: “(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. 2. 3. 4.

Vitamins
Proteins
Minerals
Caloric intake”

F. Abeaze

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October 29, 1991
245.1206

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 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: 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.”

In interpreting and implementing the broad provisions of Section 6359(c), Regulation 1602(a)(5) sets up a two-step analysis. The threshold question in 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, the its sales are taxable if one of the two following 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, proteins, minerals, or calories. The subsequent references to “such products” in that subsection refer to products which occur in one of the enumerated forms, not products for which the claims prescribed in subsections (A) and (B) are made. B.

Tax Consequences
Based on the above standard, we conclude as follows:

1.
Metabolic Optimizer High Energy Performance Bar. The label designates this product as a meal replacement or meal supplement and states that it supplies per serving 190 calories and 33% of the minimum RDA of vitamins and minerals. Emergency Regulation 1602(a)(4)(B)(1), as currently drafted, defines food bars as “fabricated snacks” the sales of which are taxable. The regulation is currently being revised to exempt “meal replacement bars” which, per serving as defined by the manufacturer, supply at a minimum 250 calories and 25% of the minimum RDA of vitamins and minerals. Because this product only supplies 190 calories per serving, it does not qualify as a “meal replacement bar” with the result that its sales are subject to tax. 2. Metabolic Optimizer Formula. This is a powdered drink mix. The label states that it supplies “a more potent and highly concentrated source of branched-chain amino acids … plus energizing carbohydrates and medium-chain tri-glycerides” [emphasis in original] along

F. Abeaze

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October 29, 1991
245.1206

with “high-potency vitamins, minerals and electrolytes, essential fatty acids, antioxidants, optimizers, and peak performance nutrients.” The label also has instructions on use of the product for weight gain or loss. If used as the sole source of nutrition, it provides only 351 claories and 31 grams of protein per day. The label thus indicates that this product is designed to increase the intake of vitamins an dminerals before and after exercise or to effect weight gain or loss. It does not supply enough calories and protein to qualify as a complete dietary food. Therefore, this item does not qualify as an exempt food product under the above regulation; its sales are subject to tax. 3. 100% Pure Milk/Egg Protein Powder. This is a powdered drink mix which the label designates a “High (P.E.R.)formance Protein Powder Specifically Formulated to Enhance the Muscle Building Process” and “an excellent protein drink supplement.” We have previously considered such protein supplements to be excluded from the term “food products.” (See Annot. 245.1270.) Sales of this product are subject to tax. 4. Weight Loss Powder. This is a powdered drink mix which the label describes as a “Meal Supplement/Meal Replacement Nutritional Drink Mix Formulated to Help Promote Natural Weight Loss.” It supplies 300 calories and 72 grams of protein per day. The label thus designates this product as both a meal supplement and weight-loss formula. Pursuant to the above authority, its sales are subject to tax. 5. High Performance Weight Gainer Formula. This is a powdered drink mix which the label describes as a “Concentrated Drink Mix Specially Formulated to help Maximize Weight Gain and Overall Strenght.” It supplies 970 calories and 36 grams of protein per day. It is thus a food product in powdered form designed to effect weight gain. Under the above authority, its sales are subject to tax.

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