Why was Wonder Bee Royal Jelly exempt while Kiku Royal Jelly was taxable when both were sold in capsules?

Plain-English summary

Both products were royal jelly sold in capsule form, but their labels differed.

Wonder Bee Royal Jelly contained royal jelly blended with wheat germ oil, honey, and soya lecithin. Its label gave content information but did not describe the product as a dietary or food supplement. Board staff had previously treated encapsulated royal jelly as an “unusual food” when no supplement claim appeared. Wonder Bee was therefore exempt.

Kiku Royal Jelly was expressly labeled a “nutritional dietary food supplement.” Under Regulation 1602(a)(5), that description excluded the capsule product from the food exemption. Kiku's retail sales were taxable.

The letter also limited its own reliance value. Because the CPA did not identify the client, counsel said the response could not be treated as a binding opinion under Revenue and Taxation Code section 6596.

Common questions

Did capsule form alone make royal jelly taxable?

No. Wonder Bee was also sold in capsules but remained exempt because neither its label nor accompanying literature described it as a supplement.

What fact made Kiku taxable?

Its label expressly called the product a nutritional dietary food supplement.

Was this a binding opinion for the CPA's client?

No. The source says the client was not identified, so the letter could not receive binding-opinion treatment under section 6596.

Citations and references

• California Revenue and Taxation Code sections 6051, 6201, 6359, and 6596 (as cited)
• California Sales and Use Tax Regulation 1602, including subdivision (a)(5) (as cited)
• Redacted CPA's September 15 and 25, 1989 letters to Gary Jugum requesting an opinion for an unidentified client — letters referenced and characterized but not reproduced in the official PDF
• Wonder Bee Royal Jelly and Kiku Royal Jelly labels and Wonder Bee accompanying literature — selected capsule form, ingredients, content statement, and supplement-language facts supplied; complete labels, literature, formulations, ingredient specifications, directions, packages, samples, tests, manufacturer records, invoices, and retail-sales records not reproduced in the official PDF
• Unidentified prior Board holding that encapsulated royal jelly was unusual food absent supplement labeling — holding referenced without opinion, ruling, annotation, date, analysis, or supporting record in the official PDF
• Official Annotation 245.1920's condensed comparison, including its source-printed Wonder Bee Jelly form — annotation does not explain omission of Royal or supply additional label, literature, prior-holding, or implementation records
• Possible later client identification, product sale, label or formulation change, binding-opinion request, 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/245-1920.pdf

Original ruling text

245.1920

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-5589

October 25, 1989

Mr. [W], C.P.A.
[W]
XXX --- ---, Suite XXX
--- ---, California XXXXX
Re:

Wonder Bee Royal Jelly
Kiku Royal Jelly

Dear Mr. [W]:
This is in response to your letters of September 15 and 25, 1989 to Mr. Gary Jugum. You have requested our opinion regarding the correct application of tax to your client’s retail sales of two royal jelly products. Specifically, you wish to know whether these products qualify as exempt food products under Revenue and Taxation Code Section 6359 and Sales and Use Tax Regulation 1602. The two products in question are Wonder Bee Royal Jelly and Kiku Royal Jelly. Wonder Bee Royal Jelly is sold in capsule form. It contains royal jelly blended with wheat germ oil, pure honey, and soya lecithin. Its label contains information regarding the capsule’s contents and no further description. Kiku Royal Jelly is also sold in capsule form. It is described on its label as a “nutritional dietary food supplement.” California Sales and Use Tax Law imposes a tax on the sale or use of tangible personal property in this state, unless the sale or use is otherwise exempt from taxation (Rev. & Tax. Code §§ 6051, 6201). As provided in Revenue and Taxation Code Section 6359 and Sales and Use Tax Regulation 1602, tax does not apply to the sale or use of “food products” for human consumption. Regulation 1602(a)(5), which interprets and applies Section 6359, provides that: “(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 ….

Mr. [W]

-2-

October 25, 1989
245.1920

“… [U]nusual 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 ….” (Emphasis added.) As you point out in your letter, we have held in the past that encapsulated royal jelly falls within the category of an “unusual food” as long as the label does not describe the royal jelly as a “food supplement or the equivalent” pursuant to Regulation 1602(a)(5). Wonder Bee Royal Jelly is not described on its label or its accompanying literature as a dietary or food supplement. It would therefore be considered and “unusual food” and tax will not apply to its sale. We are of the opinion that the Kiku Royal Jelly does not qualify as an exempt food product because it is clearly described on its label as a dietary supplement. Tax will apply to your client’s retail sale of this product. We note that because you have not identified your client, this letter may not be treated as a binding opinion pursuant to Revenue and Taxation Code 6596. If you have further questions concerning this matter, please write this office again. Very truly yours,

Mary C. Armstrong
Senior Tax Counsel
MCA:wak