Were Medifast nutritional products exempt when sold through the described physician-controlled weight program?

Plain-English summary

California treated Medifast weight-loss products as exempt prescription medicines when sold or furnished under the program described in the request. Patients received a physical examination with laboratory findings, weekly monitoring by a licensed physician and additional lab work, and a controlled nutrient intake of 486 calories per day. The nutrients were sold on prescription.

The conclusion was conditional. The staff said the products qualified under Regulation 1591(a)(1) and (b)(1) “when sold or furnished under the conditions” described, rather than creating a blanket exemption for every Medifast sale.

Common questions

Was a prescription the only program feature identified?

No. The source also emphasized the physical examination, laboratory work, weekly physician monitoring, and controlled nutrient intake.

Did staff issue a formal tax ruling?

No. The letter said only the Board could issue a ruling and that staff was providing its opinion on the stated facts.

Citations and references

• California Sales and Use Tax Regulation 1591(a)(1) and (b)(1) — provisions under which the described Medifast sales qualified as prescription medicines

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/425-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/425-1115.pdf

Original ruling text

425.1115

STATE OF CALIFORNIA

WILLIAM M. BENNETT
First District, Kentfield

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

September 29, 1992

BURTON W. OLIVER
Executive Director

Dr. --- -. F---, M.D.
--- --- ---, Inc.
--- --- --- -----, --- 9XXXX-XXXX
Re:

EF HQ XX-XXXXXX
Medifast

Dear Dr. F---:
I am responding to your letter to the Legal Division dated August 14, 1992. You requested a sales tax ruling on the application of sales and use tax to the "Medifast" program. We note that the Board Staff cannot issue tax rulings; only the Board itself may do that. However, we can give you our opinion regarding the correct application of tax to a given set of facts. You state that your group sponsors "Medifast," which you indicate is a physiciancontrolled weight-reduction and maintenance program. Your patients require a physical examination with laboratory findings, then weekly monitoring by a licensed physician and lab work, as well as controlled intake of nutrients that contain 486 calories per day. You indicate that the nutrients are sold on prescription. We have previously determined that "Medifast" weight-loss products, when sold or furnished under the conditions you describe, qualify as a prescription medicine. Thus such sales are exempt from tax under Sales and Use Tax Regulation 1591(a)(1) and (b)(1).

Dr. M--- D. F---, M.D.

-2-

September 29, 1992
425.1115

For your information, I have included a copy of Regulation 1591. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel

JLW:es
Enclosure: Reg. 1591