Was whole, bulk lecithin exempt when its label did not present it as a dietary supplement or adjunct?

Plain-English summary

The store sold the lecithin in whole, bulk form.

Tax counsel classified that lecithin as an exempt food product so long as its label or package did not indicate that it was sold as a dietary supplement or adjunct.

The opinion contrasted the bulk product with “lecithin complex” and “super lecithin” listed in the enclosed grocery-store publication. Those products were taxable because they were sold as dietary supplements.

The original 1989 letter also referred to medicinal claims. A later note appended to the source says medicinal claims are no longer used to distinguish a food product from a medicine, and the current annotation marks a 2020 amendment. The published annotation now states the exemption in terms of whole, bulk form and the absence of supplement or adjunct labeling.

The same supporting opinion separately analyzed herbal extracts, essential oils, ginseng with royal jelly, bee pollen, alfalfa seeds, and powdered seaweed, algae, and wheatgrass. This page addresses only lecithin.

Common questions

Was every lecithin product exempt?

No. The source specifically distinguished whole, bulk lecithin from products sold as dietary supplements.

Were “lecithin complex” and “super lecithin” exempt?

No. The opinion said those products were taxable because they were sold as dietary supplements.

Does a medicinal claim still control the food-versus-medicine classification?

The later note in the official source says no. The current annotation focuses on whether the product is presented as a dietary supplement or adjunct.

Citations and references

• California Revenue and Taxation Code section 6359(c) (as cited)
• California Sales and Use Tax Regulations 1588 and 1602 (including subdivisions (a), (a)(1), and (a)(5)) (as cited)
• California Sales and Use Tax Annotation 245.0724, dated November 17, 2008 — cited in the July 2, 2009 note concerning medicinal claims
• Board publication Tax Tips for Grocery Stores, including “Classification of Products Sold by Grocers” at pages 22-30 and its taxable lecithin-complex and super-lecithin listings — publication cited and stated as enclosed but not reproduced in the official PDF
• Redacted store representative's June 5, 1989 request for advice concerning specified grocery and health-food items — request referenced but not reproduced in the official PDF
• Reviewed categories: herbal extracts, essential oils, ginseng root/royal jelly, bee pollen, lecithin, alfalfa seeds, and dried seaweed, algae, and wheatgrass — forms, labels, uses, conditions, and outcomes described; complete product identities, labels, packages, ingredients, carrier oils, formulations, nutrition data, promotional materials, samples, tests, invoices, and sales records not reproduced in the official PDF
• Whole bulk lecithin and contrasting lecithin-complex and super-lecithin product evidence — forms and supplement status described; complete labels, formulations, ingredients, packages, nutrition data, samples, tests, invoices, and sales records not reproduced in the official PDF
• Revenue and Taxation Code section 6359, Regulation 1588, and Tax Tips for Grocery Stores enclosures — stated as enclosed; enclosure copies not reproduced in the official PDF
• Official Annotation 245.1497's Am. 2020-2 notation and the PDF's July 2, 2009 RDT note — amendment materials and separate support for the note not supplied on the annotation page or in the official PDF
• Possible later information about essential-oil use, product sale, label or formulation 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/245-1497.pdf

Original ruling text

245.1497

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 327-3400

August 23, 1989

Ms. [S]
--- --- --XXX - --- -----, CA XXXXX
F- -- XX-XXXXXX
Dear Ms. [S]:
I am writing in response to your June 5, 1989 request for legal advice regarding the application of sales tax to certain items sold at the [store]. I am enclosing the Board’s publication entitled “Tax Tips for Grocery Stores” which provides useful guidance and contains the relevant regulations. Generally, sales of food products for human consumption are exempt from taxation. Revenue and Taxation Code Section 6359 (enclosed) provides at subsection (c) that “[f]or purposes of this section ‘food products’ do not include medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.” The following discussion clarifies the applicability of the rules to the specific items mentioned in your letter. Herbal Extracts These are plant extracts which have been cold processed in a mixture of alcohol and water. They are sold in a one-ounce bottle with a dropper. The label states “for use as a beverage.” The herbal extracts as described are exempt food products provided that they are sold as a beverage and provided that the label or packaging makes no claim to the product’s medicinal or curative qualities or to a dietary benefit.

Ms. [S]

-2-

August 23, 1989
245.1497

Essential Oils
These are products such as oil of clove, oil of fir, oil of lemon, etc. The oils are sold in one ounce bottles with no dropper. The labels contain no statement as to use. However, it is my understanding that “essential oils” sold in one ounce bottles are generally used as scents and not meant to be ingested. If this is correct, then the essential oils are not food products and are subject to sales tax. If you disagree with this, please send further information as to the use of “essential oils.” You should indicate the type of oil in which the essence is suspended, e.g., mineral, safflower, etc., as this information would be helpful in determining whether essential oils are food products. Ginseng Root/Royal Jelly This is sold as a whole or sliced dried root in a vial of liquid. The label states “liquid tonic to be taken orally. Ingredients: 20 mg. ginseng and 300 mg. royal jelly.” This product is exempt as a food product provided the label or package makes no claim of medicinal qualities or indicates that the product is sold as a dietary supplement or adjunct. Bee Pollen This product is sold in whole, bulk form. Bee pollen is an exempt food product provided the label or package makes no claim of medicinal qualities or indicates that the product is sold as a dietary supplement or adjunct. Lecithin This product is sold in whole, bulk form. Lecithin is an exempt food product provided the label or package makes no claim of medicinal qualities or indicates that the product is sold as a dietary supplement or adjunct. Please note that the section entitled “classification of products sold by grocers” at pages 22-30 of the enclosed publication lists both “lecithin complex” and “super lecithin” as taxable items. These products are taxable because they are sold as dietary supplements. Alfalfa Seeds This product is sold in whole, bulk form. The seeds are used to make alfalfa sprouts. Sales and Use Tax Regulation 1588 (enclosed) provides, in relevant part, that “[t]ax does not apply to sales of seeds … the products of which ordinarily constitute food for human consumption….” Therefore, alfalfa seeds used to make sprouts are exempt from sales tax.

Ms. [S]

-3-

August 23, 1989
245.1497

Dried Seaweed, Algae, and Wheatgrass
These products are sold in powdered form.
Regulation 1602(a) provides that “[t]ax does not apply to sales of food products for human consumption” (with certain exceptions). The definition of “food product” includes “health foods.” (Reg. 1602(a)(1).) Further, “unusual foods such as brewer’s yeast, wheat germ, and seaweed are not subject to tax except when their label states they are a food supplement or the equivalent.” (Regulation 1602(a)(5).) Dried seaweed, algae, and wheatgrass in powdered form are exempt food products provided that the label or packaging makes no claim to the product’s medicinal or curative qualities or to a dietary benefit. Please feel free to contact this office if you have further questions regarding the applicability of sales tax to items sold at the [store]. Sincerely,

Stella Levy
Tax Counsel
SCL:cl
Enclosures

A "medicinal claim" on the product label is no longer used as a basis for differentiating a food product from a medicine. Please see Annotation 245.0724 (11/17/08). RDT. 7/2/09.