When did Shaklee Instant Protein Drink Mix become taxable after its label began saying to use it only as a food supplement?

Plain-English summary

Shaklee Instant Protein Drink Mix had previously been treated as an exempt food product. Its label later added the instruction: "Use this product as a food supplement only. Do not use for weight reduction."

Regulation 1602(a)(5) excluded powdered and other listed-form products when their packages or labels described them as food or dietary supplements or adjuncts.

Because the revised label expressly called the drink mix a food supplement, counsel reclassified it as taxable beginning January 1, 1992. Retail sales before that date would continue to be treated as nontaxable.

The same letter said Slim Plan Drink Mix, Meal Shakes, and Performance Drink Mix continued to qualify as food products. The taxable conclusion here was specific to Instant Protein Drink Mix.

Common questions

Why was the product reclassified?

Its new label expressly instructed consumers to use it only as a food supplement.

Was the change retroactive?

No. The letter applied taxable treatment prospectively from January 1, 1992 and preserved nontaxable treatment for earlier retail sales.

Were all Shaklee drink products made taxable?

No. The letter continued to treat three other named products as food.

Citations and references

• California Sales and Use Tax Regulation 1602 (including subdivision (a)(5)) (as cited)
• Redacted representative's September 17, 1991 letter concerning four Shaklee products — request referenced but not reproduced in the official PDF
• November 15, 1991 Sacramento meeting about the products' taxability — meeting referenced without minutes, notes, attendance record, exhibits, or other supporting material
• Prior Board-office opinion treating Instant Protein Drink Mix as exempt food — opinion referenced without an identifier, date, text, or supporting record
• Instant Protein Drink Mix label adding a food-supplement-only instruction and weight-reduction disclaimer — label quoted in part but not reproduced in the official PDF
• Slim Plan Drink Mix, Meal Shakes, and Performance Drink Mix inquiry and continuing food-product conclusions — outcomes supplied without complete labels, formulations, nutrition data, packages, samples, tests, invoices, or sales records
• Possible implementation of the January 1, 1992 prospective reclassification, product sale, label change, 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/245-1286.pdf

Original ruling text

245.1286

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
TELEPHONE (916) 445 - 3723

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR
Third District, San Diego
Matthew K. Fong
Fourth District, Los Angeles

November 27, 1991

GRAY DAVIS
Controller, Sacramento

Burton W. Oliver
Executive Director

Mr. [V]
[S]
XXX --- --P.O. Box XXXX
--- ---, CA XXXXX
Re:

[S]

Dear Mr. [V]:
This is in response to your letter of September 17, 1991. We met here in Sacramento on November 15, 1991 to discuss the taxability under the Sales and Use Tax Law of certain products of your client [S]. It is our opinion that [S] Instant Protein Drink Mix is a taxable product by virtue of the fact that the label now provides as follows: “Notice: Use this product as a food supplement only. Do not use for weight reduction.” Under our Regulation 1602(a)(5), the term “food product” does not include any product for human consumption in liquid, powdered, granular, tablet, capsule, lozenge, or pill form which is described on its package or label as a food supplement, food adjunct, dietary supplement, or dietary adjunct. This office had previously issued its opinion that this product qualified for exemption as a food product. Under the circumstances of this case we believe it appropriate to reclassify this product as a taxable item on a going forward basis, effective January 1, 1992. Retail sales of this product prior to this date will be regarded as nontaxable by this agency. It is our opinion that the other three items which are the subject of your inquiry – [S] Slim Plan Drink Mix, [S] Meal Shakes and [S] Performance Drink Mix – all qualify as food products under our Regulation 1602, for periods prior to your inquiry and on a current and continuing basis.

Mr. [V]

-2-

November 27, 1991
245.1286

We again extent to you our apologies for the delay in our reply (and the summary nature of this letter); however, you are aware of the limitations under which we are presently operating. Very truly yours,

Gary J. Jugum
Assistant Chief Counsel
GJJ:wk
cc:

Mr. Glenn A. Bystrom
Mr. John L. Waid