Were Food for Life soups and Super Oats exempt even though the product line was marketed as a weight-loss formula?

Plain-English summary

Food for Life marketed eight products as an “Ultimate Weight Loss Formula.” The labels said three daily servings supplied 420 calories and 45 grams of protein and could serve as the sole source of nutrition for no more than two weeks unless monitored by a physician.

Despite that weight-loss marketing, tax counsel treated the two soups and the Super Oats cereal as exempt food products. Regulation 1602(a)(1) specifically listed soups and cereals, and the memorandum classified these items as those ordinary food categories sold in dehydrated form.

That classification kept the soups and Super Oats outside the taxable result applied to the other products. The powdered drinks—including Festive Eggnog—and chocolate dessert were designed for weight loss, were labeled as dietary adjuncts, and did not supply enough calories or protein to qualify as complete dietary food. Their sales were taxable.

The opinion therefore shows that products within the same branded weight-loss line could receive different treatment based on their actual food category and form.

Common questions

Did the weight-loss claims make every Food for Life product taxable?

No. The soups and Super Oats remained exempt because counsel treated them as listed soups and cereal in dehydrated form.

Were the drink mixes and chocolate dessert also exempt?

No. The source separately concluded that those powdered weight-loss products were taxable and were not complete dietary foods.

Why did dehydrated form matter?

Counsel treated dehydration as a form of the listed soups and cereal, rather than as the kind of generic powder subject to the supplement exclusion.

Citations and references

• California Revenue and Taxation Code section 6359(c) (as cited)
• California Sales and Use Tax Regulation 1602 (including subdivisions (a)(1) and (a)(5)) (as cited)
• L. Salcedo's March 19, 1991 memorandum requesting advice — memorandum referenced but not reproduced in the official PDF
• Return Review's January 14, 1991 letter requesting Diet Dutch Chocolate Drink Mix and Food for Life Chocolate Drink Mix labels — letter referenced but not reproduced in the official PDF
• Redacted taxpayer representative's January 30, 1991 submission of eight Food for Life labels — submission and labels referenced and quoted in part but not reproduced in the official PDF
• National Academy of Sciences recommendations and U.S. RDA claims printed on the product directions — claims quoted without separate standards, calculations, test results, or supporting records
• Eight reviewed Food for Life products: four drink mixes, two soups, Super Oats dehydrated cereal, and a chocolate dessert mix — forms, calories, protein, weight-loss directions, nutrition claims, and outcomes described; complete product names, labels, packages, ingredients, formulations, nutrition data, promotional materials, samples, tests, invoices, return-review workpapers, and sales records not reproduced in the official PDF
• Possible later return adjustment, 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/245-1367.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

L. Salcedo
Return Review

From:

John L. Waid
Tax Counsel

Subject:

[K]
S- -- XX-XXXXXX

245.1367
April 24, 1991

I am responding to your memorandum to me of March 19, 1991. You have requested advice as to the applicability of the “food products” exemption provided by Regulation 1602(a)(5) to the above taxpayers’ sales of certain of their products. In your letter of January 14, 1991, to the above taxpayers, you requested that they submit labels of the Diet Dutch Chocolate Drink Mix and the Food for Life Chocolate Drink Mix for review as to whether or not the products qualify as “food products” under Regulation 1602(a)(5). Mr. [K], on January 30, 1991, submitted labels for eight Food for Life products. Four of the products are drink mixes; two are soups; one – the Super Oats – is apparently a dehydrated cereal; and the last is a chocolate dessert mix. Except for the Super Oats, which supplies 160 calories, each of the products supplies the consumer 140 calories per serving. All of the labels identify the Food for Life line as “The Ultimate Weight Loss Formula”, the directions contain the following statements: “The Food for Life Ultimate Weight Loss Formula is a delicious, nutritious, balanced, low calories food, which provided 100% of the U.S. RDA of all vitamins, minerals and protein as well as trace elements and electrolytes at levels recommended by the National Academy of Sciences for good health in only 420 calories per day.

“The Food for Life Ultimate Weight Loss Formula is designed for use as a sole source of nutrition for periods of not to exceed two consecutive weeks, unless on a physician-monitored program.” The Directions contain other admonishments about use of the products to “speed weight loss”. If the products were used as the sole source of nutrition consumed as the day’s three meals, they would supply 420 calories and 45 grams of protein.

Ms. L. Salcedo

-2-

April 24, 1991
245.1367

OPINION
In interpreting and implementing the broad provisions of Section 6359(c), Regulation 1602(a)(5) 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, the next question is whether or not 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, protein, minerals, or calories? If the answer to either part of the last question is “yes”, the product is excluded from the definition of “food products” with the result that its sales are subject to tax unless, of course, some other exemption applies. Additionally, we have long recognized that if the product occurs in one of the specified forms, and absent some other exemption being applicable it will be taxable if it is generally recognized to be a dietary supplement or a weight loss product, even if it is not described as such on its label and does not emphasize its vitamin, protein, mineral, or caloric content. If, however, the product, though subject to one of the criteria above, is a “complete dietary food”, supplying a daily intake of at least 900 calories, 70 grams of high quality protein, and the minimum RDA of vitamins and minerals, it is considered to be “a food product”. In that case, the sales of the product are exempt from tax. Based on the above criteria, we conclude in the case of the specific Food for Life products at issue as follows: (1) Soups, Super Oats. Because soups and cereasl are listed in Regulation 1602(a)(1) as “food products,” we are of the opinion that they are to be considered as food products occurring in dehydrated form. Therefore, the sales of these items are exempt from tax. (2) Drinks (including “Festive Eggnog”) and Chocolate Dessert. These are powdered products. The labels Mr. [K] supplied clearly state that these products are for short-term use for the purpose of weight loss. Not only do the labels designate the products as dietary adjuncts, but the products are designed for the purpose of weight loss, and also do not supply enough protein and calories to be termed a “complete dietary food”. As a result, these products are excluded from the definition of “food products” by both prongs of Regulation 1602(a)(5) resulting in their sales being subject to tax.

JLW:es
cc:

O.A. McCarty, Supervisor, Return Review