Are nutritional shakes, nutrition bars, and whole-food chewable tablets taxable in Connecticut, or exempt as food products?

Plain-English summary

A company sells two kinds of products:

• "Snacks" — powdered nutritional shake mixes and nutrition bars containing the nutrients, protein, and fiber of whole foods, marketed as snacks or meal substitutes.
• "Concentrates" — chewable tablets and capsules made by juicing, dehydrating, and powdering whole fruits, vegetables, and grains (peels, seeds, and leaves included).

Both carry a "Nutrition Facts" box. The company asked whether the products are exempt as food products for human consumption under Conn. Gen. Stat. § 12-412(13).

DRS ruled both are exempt:

• Snacks are clearly food. They're products "normally consumed by human beings for nutritive value or taste satisfaction," so they fit the food-products exemption directly.
• Concentrates are food too, despite the tablet/capsule form. The food exemption excludes "tonics or preparations in liquid, powdered, granular, tablet and capsule form" that are sold as dietary supplements or adjuncts. Because the Concentrates come in chewable tablets and capsules, they'd be excluded if sold as dietary supplements. But they aren't dietary supplements: dietary supplements (exempt under the separate § 12-412(120)) must be labeled as such with a "Supplement Facts" box, and these instead carry a "Nutrition Facts" box and are marketed not as multivitamins, medicine, treatments, or cures, but as natural nutrients consumed for nutritive value. So they remain food products under § 12-412(13).

The recurring theme across Connecticut's food/supplement rulings holds here: form (tablet, capsule, powder) doesn't decide it — labeling and marketing do. A Nutrition Facts box and food marketing keep a product in the food category.

What this means for you

Food, snack, and nutrition-product makers

Nutrition bars, protein/meal-replacement shakes, and similar snack or meal-substitute products are exempt food products in Connecticut. Even products in pill or capsule form can be exempt food — not taxable supplements pulled out of the food exemption — if they're marketed and labeled as food (Nutrition Facts box) rather than as a dietary supplement. Keep your labeling consistent with how you want the product classified.

Supplement and "whole food" brands

Putting whole-food nutrients in a chewable tablet doesn't automatically make the product a "dietary supplement" for Connecticut tax purposes. What DRS looks at is whether it's labeled and marketed as a supplement (Supplement Facts box, supplement claims). Both food and supplements are exempt in Connecticut, but the classification path differs.

Accountants and tax professionals

The result rests on Conn. Gen. Stat. § 12-412(13) (food products, with its "sold as dietary supplements or adjuncts" exclusion for powders/tablets/capsules) versus § 12-412(120) (dietary supplements, defined by "Supplement Facts" labeling and 21 C.F.R. § 101.36), informed by Conn. Agencies Regs. § 12-426-29 and Special Notice 2015(1). The deciding facts were the Nutrition Facts labeling and food (not supplement/medicinal) marketing.

Common questions

Q: Are nutrition bars and protein shakes taxable in Connecticut?
A: No. DRS held these snacks and meal substitutes are exempt food products for human consumption under Conn. Gen. Stat. § 12-412(13).

Q: My product is in tablet/capsule form — is it automatically a taxable supplement?
A: No. Tablet/capsule "concentrates" made from whole foods are still exempt food products if they're labeled with a Nutrition Facts box and marketed as food rather than as a dietary supplement.

Q: What makes something a "dietary supplement" instead of food here?
A: Chiefly the labeling and marketing — a dietary supplement is identified by a "Supplement Facts" box and supplement labeling. These products carried a Nutrition Facts box, so they were food.

Q: Does the tax outcome change if it's a supplement?
A: Not for taxability — both food products and dietary supplements are exempt in Connecticut. DRS classified these as food products based on their labeling and marketing.

Q: Does this ruling apply to my product?
A: Not automatically. A Connecticut Ruling binds DRS only for the taxpayer and facts it addressed. Different labeling or marketing could lead to a different classification.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-412(13) (exemption for food products for human consumption; excludes items sold as dietary supplements or adjuncts)
• Conn. Gen. Stat. § 12-412(120) (exemption for dietary supplements; defined by "Supplement Facts" labeling and 21 C.F.R. § 101.36)
• Conn. Gen. Stat. §§ 12-407 and 12-408 (imposition of sales and use taxes on retail sales)

Regulations:

• Conn. Agencies Regs. § 12-426-29 (defines "food products for human consumption")

Administrative guidance:

• Special Notice 2015(1), Sales and Use Tax Exemption for Nonprescription Drugs and Medicines

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 2016-2

Original ruling text

Ruling 2016-2, Sales and Use Taxes, Food Products, Nonprescription Drugs and Medicines

FACTS:

The Company sells powdered nutritional shake mixes and nutrition bars that contain the nutrients, protein, and fibers of whole foods, which are marketed for sale as snacks or meal substitutes (“Snacks”).

The Company also sells chewable tablets and capsules that it describes as “made from and categorized as whole foods.”  Fruits, vegetables and grains (including peels, seeds and leaves) are juiced, dehydrated, and powdered, and then incorporated into the chewable tablets and capsules (“Concentrates”).

The labels on the Snacks and the Concentrates bear the “Nutrition Facts” box as described in Title 21 of the Code of Federal Regulations § 101.9.

ISSUE:

Are sales of the Snacks and Concentrates exempt from sales and use taxes as sales of food products for human consumption under Conn. Gen. Stat. § 12-412(13)?

RULING:

The sales of the Snacks and Concentrates are exempt from sales and use taxes as sales of food products for human consumption under Conn. Gen. Stat. § 12-412(13).

DISCUSSION:

Snacks

Retail sales of tangible personal property in the State of Connecticut are subject to sales and use taxes, unless specifically exempt. Conn. Gen. Stat. §§ 12-407 and 12-408.  Sales of “food products for human consumption” are exempt from tax under Conn. Gen. Stat. § 12-412(13), which defines food products as including:

cereals and cereal products, milk and milk products, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products other than candy and confectionery; coffee and coffee substitutes, tea, cocoa and cocoa products other than candy and confectionery.

The definition of “food products for human consumption” is further elaborated upon by Conn. Agencies Regs. § 12-426-29 to mean all products normally consumed by human beings for nutritive value or taste satisfaction.

The Snacks are meals or snacks containing fiber and protein that are “normally consumed by human beings for nutritive value or taste satisfaction.”  Therefore, sales of these products are exempt as sales of food products for human consumption.

Concentrates

The definition of “food products for human consumption” in Conn. Gen. Stat. § 12-412(13) specifically excludes, among other items, “tonics or preparations in liquid, powdered, granular, tablet and capsule form” that are “sold as dietary supplements or adjuncts.”

As the Concentrates are in the form of chewable tablets and capsules, these products would be excluded from the definition of “food products for human consumption” if “sold as dietary supplements or adjuncts.”  Sales of dietary supplements are exempt from sales and use taxes under a different provision than food products, Conn. Gen. Stat. § 12-412(120).  For purposes of Conn. Gen. Stat. § 12-412(120), dietary supplements are defined as products, other than cigarettes or tobacco products, intended to supplement the diet of a human or animal that meet the following three requirements:

1. Contain one or more of the following dietary ingredients:

a.  A vitamin;

b.  A mineral;

c.  An herb or other botanical;

d. An amino acid;

e.  A dietary substance for use to supplement the diet by increasing the total dietary intake; or

f.  A concentrate, metabolite, constituent, extract, or combination of any ingredient described in above.

2.  Are intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, are not marketed as conventional food and are not marketed for use as a sole item of a meal or of the diet; and

3.   Are required to be labeled as a dietary supplement, identifiable by the “Supplement Facts” box found on the label and as required pursuant to Title 21 of the Code of Federal Regulations § 101.36.

Special Notice 2015(1) , Sales and Use Tax Exemption for Nonprescription Drugs and Medicines .

Although the Concentrates are in the form of chewable tablets or capsules, they do not qualify as “dietary supplements” because they are not marketed as a dietary supplement and are not labeled with the “Supplement Facts” box.  Instead, the Concentrates bear the “Nutrition Facts” box.  The United States Food and Drug Administration is responsible for assuring that foods sold in the United States are safe, wholesome and properly labeled, pursuant to federal laws that require most foods to bear a “Nutrition Facts” box. [1]

The Concentrates are whole fruits, vegetables and grains that have been converted into a powdered form, then incorporated into chewable tablets and capsules.  The Company markets the Concentrates not as multivitamins, medicine, treatments or cures for any disease, but rather as natural nutrients to be consumed for nutritive value, which is consistent with the products being labeled with the “Nutrition Facts” box.  For these reasons, the Concentrates are considered food products, and are not considered dietary supplements for purposes of the exclusion from food products set forth in Conn. Gen. Stat. § 12-412(13).  Therefore, sales of the Concentrates are exempt as sales of food products for human consumption.

OFFICE OF COUNSEL

April 29, 2016

U.S. Food and Drug Administration, Guidance for Industry: A Food Labeling Guide , www.fda.gov/Food/

GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/LabelingNutrition/ucm2006828.htm (last visited April 29, 2016).