Are complete-nutrition and specialized nutritional shakes exempt from Colorado sales tax as 'food,' or taxable as dietary supplements?

Plain-English summary

A manufacturer of nutritional shake products asked whether four of its products are exempt from Colorado sales and use tax as "food." The Department ruled that all four qualify as food and are therefore exempt from state sales and use tax when sold for home consumption — with an important catch about local taxes.

The four products:
- Product 1 — a complete-nutrition shake with a milkshake-like consistency, marketed as a meal or recipe ingredient.
- Product 2 — a shake marketed for focused nutritional benefits (immune health, bone health), meant to be consumed as a meal.
- Product 3 — a line of shakes formulated for people with diabetes (slow-digesting carbohydrates).
- Product 4 — a powder/liquid marketed to athletes for muscle building and recovery after a workout.

The deciding factor was the label. Colorado defines exempt "food" by adopting the USDA's SNAP and WIC program definitions, which exclude dietary supplements. To tell food from a supplement, the USDA relies on the FDA-required label: a product carrying a "Nutrition Facts" label is food; one carrying a "Supplement Facts" label is a dietary supplement. All four products carry Nutrition Facts labels, so they're food for Colorado tax purposes.

Notably, the Department conceded it might have reached a different result on its own: "Had we independently reviewed whether these products are dietary supplements, we may have concluded that some were dietary supplements, particularly Product 4." But it's bound by the federal definition — the manufacturer's choice of the Nutrition Facts label (which the FDA leaves to the manufacturer) controls whether the item is "food."

The local-tax catch: the state exemption doesn't automatically reach local sales tax. Cities and counties can choose to tax food (§ 29-2-105), and many do. So these shakes are exempt from state tax but may still owe city/county sales tax in jurisdictions that tax food — unless bought with food stamps (SNAP) or WIC funds. The Department's DR 1002 publication lists which jurisdictions tax food. The state-administered special districts (RTD, SCFD, the stadium district, etc.) follow the state, so the products are exempt from those.

Because this is a private letter ruling, it is binding on the Department only for this taxpayer and these facts and cannot be relied on by anyone else.

What this means for you

Makers and sellers of shakes, bars, and nutritional products

In Colorado, the Nutrition Facts vs. Supplement Facts label decides whether your product is exempt food or a taxable dietary supplement — regardless of how it's marketed. If your product carries a Nutrition Facts label, it's treated as food and is exempt from state sales tax for home consumption. Choosing the Supplement Facts label flips it to a taxable supplement. (The FDA leaves the label choice to the manufacturer, and Colorado follows it.)

Retailers and point-of-sale setups

Don't assume "protein shake" or "post-workout" products are taxable supplements. Check the label panel: Nutrition Facts = exempt food at the state level. But program your registers for local tax — many cities and counties tax food, so the same product can be state-exempt and city-taxable. SNAP/WIC purchases are exempt even locally.

Accountants and tax professionals

The rule is mechanical and powerful: Colorado's statutory food definition is controlled by the federal SNAP/WIC programs, which key off the FDA label. That can produce exemptions the Department itself might not have granted on the merits (it singled out the post-workout Product 4). Layer in § 29-2-105 local-option food taxes and use DR 1002 to map jurisdiction-by-jurisdiction treatment.

Common questions

Q: Is a protein or nutrition shake taxable in Colorado?
A: If it carries a "Nutrition Facts" label, Colorado treats it as exempt food (for home consumption) at the state level. If it carries a "Supplement Facts" label, it's a taxable dietary supplement.

Q: My product is marketed as a supplement but has a Nutrition Facts label — which controls?
A: The label. Colorado adopts the federal SNAP/WIC definition of food, which uses the FDA-required label. A Nutrition Facts label makes it "food" even if the marketing sounds supplement-like.

Q: Does the exemption cover city and county sales tax?
A: Not necessarily. The state exemption applies, but cities and counties may tax food (§ 29-2-105). The same shake can be exempt from state tax and still owe local tax — unless purchased with SNAP or WIC benefits. Use DR 1002 to check each jurisdiction.

Q: Can another company rely on this ruling?
A: No. A private letter ruling binds the Department only for the taxpayer and facts it was issued to and cannot be relied on by anyone else.

Citations and references

Statutes, rules, and references:
- § 39-26-707, C.R.S. (food exemption)
- § 39-26-102(4.5), C.R.S. (food defined via SNAP/WIC)
- 7 U.S.C. § 2012(g); 42 U.S.C. § 1786 (SNAP/WIC food definitions)
- 21 U.S.C. § 321(ff) (dietary supplement definition)
- Reg. 39-26-102.4.5(b)(9) (supplements excluded from food)
- § 29-2-105, § 29-2-105(8), C.R.S. (local option to tax food; must use state definition)
- Colorado Sales/Use Taxes (DR 1002) (which jurisdictions tax food)

Related rulings

• [[plr-25-004-sales-tax-exemption-for-items-sold-by-bakery]] — food exemption; home-consumption test
• [[gil-13-028-bagged-or-packaged-salads]] — food vs. prepared/excluded food
• [[gil-13-017-seeds-and-plants-food-and-dietary-supplements-medical-supplies-test-ki]] — food vs. dietary supplements

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/PLR-11-008.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

PLR-11-008
December 20, 2011
XXXXXXXXXXXXXXXXX
Attn: XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
Re: Private Letter Ruling
Dear XXXXXXXXXXXX,
XXXXXXXXXXXXX submitted on behalf of XXXXXXXXXXX (“Company”) a request for a
private letter ruling to the Colorado Department of Revenue (“Department”) pursuant to
Regulation 24-35-103.5. This letter is the Department’s private letter ruling.
Issue
Are Product 1, Product 2, Product 3 and Product 4 exempt from Colorado sales and use tax
because they qualify as a “food?”
Conclusion
Product 1, Product 2, Product 3, and Product 4 qualify as “food” and, therefore, are exempt
from state sales and use taxes if sold for domestic home consumption. These products are
subject to local sales taxes of those local jurisdictions that have elected to levy sales and use
taxes on food, unless the products are purchased with food stamps of WIC funds.
Background
Company manufactures a number of food and nutritional products, including XXXXXX
[complete, balanced nutrition] (“Product 1”), XXXXXX [targeted, specialized nutrition] (“Product
2”), XXXXXXXX (“Product 3”), and XXXXXXXXXXXXXXXXXX (“Product 4”)
Product 1
Product 1 is a complete nutrition shake that has a milkshake-like consistency and comes in a
variety of flavors. Company markets this product as a meal or used as an ingredient in various
recipes published by Company. Product 1 carries a “Nutrition Facts” label and not a
“Supplement Facts” label. Company does not describe the product as intended to increase
vitamin or caloric intake nor as a nutritional supplement or as an adjunct.
Product 2

Product 2 is a shake described as having a milkshake-like consistency and flavor and
marketed as providing focused nutritional benefits. Product 2 contains specialized ingredients
intended to support a particular nutritional need (immune health, bone health, etc.). Product 2
is not designed to provide general nutritional supplementations but, rather, is intended to be
consumed as a meal or as an ingredient in recipes. Product 2 carries a “Nutrition Facts” label,
not a “Supplement Facts” label, and does not describe the product as a nutritional supplement
or adjunct.
Product 3
Product 3 is a line of shakes designed for people with diabetes. This product is not designed to
increase or decrease particular levels of vitamins, minerals, calories or proteins, but is
formulated so that the carbohydrates are digested slowly so the product does not cause a
spike in blood sugar spike. Product 3 carries a “Nutrition Facts” label and not a “Supplement
Facts” label.
Product 4
Product 4 comes in both powder and liquid forms and is marketed to be consumed by athletes
after a workout or training session. Product 4 is intended to help build muscles and aid in
muscle recovery after a workout. Product 4 carries a “Nutrition Facts” label and does not
contain a “Supplement Facts” label.
Discussion
“Food” sold for domestic home consumption is exempt from sales and use tax levied by the
State of Colorado and certain state-administered local tax jurisdictions.1 Colorado defines
“food” by adopting the definition of food used by the U.S. Department of Agriculture’s (USDA)
Supplemental Nutrition Assistance Program (SNAP) and Woman, Infant and Children (WIC)
Program.2 These federal programs exclude supplements from the definition of food.3 Colorado
incorporates these federal requirements and limitations in its regulation of food, which
expressly excludes dietary supplements from the definition of food.4
A supplement is defined under federal law5 (and, therefore, under Colorado law for sales and
use tax purposes), as follows:
(1) means a product (other than tobacco) intended to supplement the diet that bears
or contains one or more of the following dietary ingredients:
(A) a vitamin;
1 §39-26-707, C.R.S. (food exemption)

2 See, §39-26-102(4.5), C.R.S. and 7 U.S.C. §2012(g) and 42 U.S.C. §1786, respectively.

3 http://www.fns.usda.gov/snap/retailers/eligible.htm. How FNS Determines Product Eligibility for SNAP Purchase

and http://www.fns.usda.gov/wic/benefitsandservices/foodpkgregs.htm Regulatory Requirements for WIC-Eligible
Foods (Medical Foods)
4 39-26-102.4.5(b)(9) (“These products [vitamins, minerals and other dietary deficiency correctors] serve as
supplements to food or food products rather than as food and, therefore, are not eligible. Because essential vitamins
and minerals occur naturally in foods, a good diet will include a variety of foods that together will supply all nutrients
needed. Since these products serve as deficiency correctors or therapeutic agents to supplement diets deficient in
essential nutrition rather than as foods, they are not eligible.”)
5 21 U.S.C. §321(ff)

(B) a mineral;
(C) an herb or other botanical;
(D) an amino acid;
(E) a dietary substance for use by man to supplement the diet by increasing
the total dietary intake; or
(F) a concentrate, metabolite, constituent, extract, or combination of any
ingredient described in clause (A), (B), (C), (D), or (E);
(2) means a product that—
(A) …is intended for ingestion…
(B) is not represented for use as a conventional food or as a sole item of a
meal or the diet; and
(C) is labeled as a dietary supplement.
To determine whether an item qualifies as food, the USDA relies6 on the food label required by
the FDA. Items that carry a “Nutrition Facts” label qualify as food under the SNAP and WIC
programs. A “dietary supplement” carries a “Supplement Facts” label and states that it is a
“dietary supplement” on the front of the product. Therefore, food items that carry a “Nutrition
Facts” label qualify as “food” for Colorado sales and use tax purposes and food items that carry
the “Supplement Facts” label are dietary supplements and do not qualify as “food” for purposes
of the Colorado sales tax exemption.
You have represented that Products 1 through 4 carry “Nutrition Facts” labels and not
“Supplement Facts” labels. Because the USDA treats these items as “food” under the SNAP
and WIC programs, these items are “food” for Colorado state and state-administered sales and
use tax purposes.7
Although not specifically addressed in your letter, we want to bring to your attention the
determination of local taxes and special district taxes due on food items. Cities and counties
have the option of taxing food.8 If they exempt food from their sales tax they must use the
same criteria used by the state in determining which items are taxable and which are exempt.9
For example, food for domestic home consumption purchased in Salida is exempt from state
sales and use tax, but is subject to Salida’s sales tax because the city does not exempt sales
of food.
You can refer to Colorado Sales/Use Taxes (DR 1002) to determine whether a city or county
taxes food. This publication, updated every January and July, indicates which statutory cities,
counties, and special districts have a sales tax exemption for food. The publication can be
found on our Web site at www.TaxColorado.com > Forms. Contact home-rule cities to find out
if they exempt food from sales tax.

6 The FDA advised the department that the manufacturer is responsible for determining which label (Nutrition label v.
Supplement label) is appropriate for its product. That is, the FDA accepts the election made by the manufacturer for
purposes of determining whether the item falls within the definition of “food” for the SNAP and WIC programs. See,
FDA website cited in footnote 2 for a discussion of FDA policy.
7 Had we independently reviewed whether these products are dietary supplements, we may have concluded that
some were dietary supplements, particularly Product 4. However, Colorado’s statutory definition of food is controlled
by how the federal programs define food.
8 §29-2-105, C.R.S. (local tax jurisdiction’s option to exempt food sales)
9 §29-2-105(8), C.R.S. (local tax jurisdiction that exempt food sales must use state’s definition of “food”).

The Department also administers the sales and use tax for special districts, which include the
Regional Transportation District, Scientific and Cultural Facilities District, Metropolitan Football
Stadium District, and rural transportation authorities. For more information about special
districts for which the department administers their taxes, see Department publication 1002.
These special districts exempt the same items that are taxed at the state level. Therefore,
Products 1 through 4 are exempt from taxes levied by these districts.
Miscellaneous
This ruling applies only to sales and use taxes administered by the Department. You may wish
to consult with home rule cities and counties which administer their own sales or use taxes
about the applicability of their taxes.
This ruling is premised on the assumption that the Company has completely and accurately
disclosed all material facts. The department reserves the right, among others, to independently
evaluate Company’s representations. This ruling is null and void if any such representation is
incorrect and has a material bearing on the conclusions reached in this ruling. This ruling is
subject to modification or revocation in accordance to Department Regulation 24-35-103.5
Enclosed is a redacted version of this ruling. Pursuant to statute and regulation, this redacted
version of the ruling will be made public within 60 days of the date of this letter. Please let me
know in writing within that 60 day period whether you have any suggestions or concerns about
this redacted version of the ruling.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue