Were sweetened protein drinks containing milk and protein bars containing flour taxed as food rather than soft drinks or candy in Illinois?

Plain-English summary

A weight-loss business sold ready-to-serve protein drinks, protein bars, snack chips, soup and omelet mixes, vitamins, and supplements. It did not prepare the items, provide seating, or sell them warm, and asked whether milk-based sweetened drinks were “soft drinks” and flour-containing bars were “candy.”

IDOR explained that, under the rates and definitions in this 2013 GIL, qualifying food for off-premises consumption received the low 1% state rate, while candy, soft drinks, alcohol, and food prepared for immediate consumption received the high 6.25% state rate, plus applicable local taxes.

A beverage containing natural or artificial sweetener was nevertheless not a soft drink if it also contained milk or milk products, qualifying substitutes, or more than 50% fruit or vegetable juice. A sweetened bar was not candy if it contained flour or required refrigeration. Those items therefore fell within food rather than the excluded soft-drink or candy categories.

Common questions

Did sucralose make a milk-based drink a soft drink? No, because the milk-product exclusion controlled.

Did sweetener make a flour-containing protein bar candy? No. Flour excluded it from the candy definition.

Citations and references

• 86 Ill. Adm. Code 130.310
• 2 Ill. Adm. Code 1200.110(a)(4)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0040.pdf

Original ruling text

ST 13-0040-GIL 08/23/2013 FOOD
This letter discusses the State tax rate applicable to sales of food, soft drinks and candy. See 86 Ill. Adm. Code
130.310. (This is a GIL.)

August 23, 2013

Dear Xxxxx:
This letter is in response to your letter dated April 25, 2013, in which you request information. The
Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the Department in
response to specific taxpayer inquiries concerning the application of a tax statute or rule to a particular fact
situation. A PLR is binding on the Department, but only as to the taxpayer who is the subject of the request for
ruling and only to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The
purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or other
sources of information regarding the topic about which they have inquired. A GIL is not a statement of
Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our
website at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with a GIL.
In your letter you have stated and made inquiry as follows:
I am writing to request your opinion as to the sales tax rate applicable concerning certain food
items; particularly certain diet food protein bars and drinks.
Statement of Facts
We operate a weight loss program/diet food business. As such as well ‘ready-to-serve’ drinks,
protein bars, snack chips as well as items to be prepared such as soup and omelet mixes. We
also sell vitamins and supplements. At the direction of our supplier we are currently charging
the high sales tax rate of 6.25% on all items under the argument that our items are considered
‘immediately consumable’. However, after further research, I believe these items qualify for the
reduced food rate when the definition of ‘immediately consumable’ is more thoroughly explored
... we do not manufacture or prepare any of these items; nor do we have any type of seating
available on our premises for immediate consumption. All items are sold at room temperature.
All are sold as part of our weight loss program. Our clients generally purchase multiples of
many items with the intent that they will consume them at a later time. I believe these items to
be considered ‘grocery’ items.
Given the above information I believe that all of our food items qualify for the reduced food rate
of 1%. The vitamins and supplements would be at the high rate of 6.25%. However, I ask your
opinion as to whether the protein bar and ready-to-serve drinks we sell constitute candy/soft
drink and are subject to the high 6.25% rate.

Attached are the nutritional facts and ingredient lists for some of the products in question.
Illinois Regulation, 86 Ill. Adm. Code 130.310(d) (6)(C) states that drinks containing sucralose
are considered soft drinks but subsection (d)(6)(E)(vii) states that drinks containing milk or milk
products are not considered soft drinks. Our drinks contain both milk products and sucralose.
Are these drinks considered soft drinks or food? Are they to be taxed at the high or low rate?
Illinois Regulation, 86 Ill. Adm. Code 130.310(d)(7)F)(xv) states that if the ingredient list of an
item contains any natural or artificial sweeteners as listed in (d)(7)(D) it is considered candy.
However, (d)(7)(B) states that products containing the ingredient labeled flour are not candy.
Most of our protein bars contain an artificial sweetener such as dextrose or sucralose yet also
contain rice flour. Many also contain milk or milk products. Are these protein bars considered
candy or food? Are they to be taxed at the high or low rate?
Requested Ruling
Would not all the food items, including those questioned above be considered ‘food’ and
therefore subject to the reduced 1.00% reduced tax rate.
In the absence of a clear definition as to whether the protein bars and drinks are candy or soft
drinks, can they be allowed the 1.00% rate based on being a ‘grocery’ item?
Authorities Supporting Requested Ruling
Illinois Regulation, 86 Ill. Adm. Code 130.310(c)(2)(B)(vi)
Illinois Regulation, 86 Ill. Adm. Code 130 Section 130.310(d)(7)(b)
Authorities Contrary to the Requested Ruling
Illinois Regulation, 86 Ill. Adm. Code 130 Section 130.310(d)(6)(C)
Illinois Regulation, 86 Ill. Adm. Code 130 Section 130.310(d)(7)(F)(xv)
Representations
To the best of my knowledge the Illinois Department of Revenue has not ruled on this specific
type of issue; nor have we submitted this or a similar issue to the Department but withdrew it
before a letter ruing was issued.
There appears in this ruling request no trade secret information to which we would request be
deleted from the publicly disseminated version of the private letter ruling.

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization” provides that
“[w]hether to issue a private letter ruling in response to a letter ruling request is within the discretion of the
Department. The Department will respond to all requests for private letter rulings either by issuance of a ruling
or by a letter explaining that the request for ruling will not be honored.” 2 Ill. Adm. Code 1200.110(a)(4). The
Department has decided to respond with a GIL.

Please see the Department’s Regulation entitled “Food, Soft Drinks and Candy” at 86 Ill. Adm. Code
130.310 which can be found on the Department’s website. As you can see in the regulation, food that is to be
consumed off the premises where it is sold (other than alcoholic beverages, candy, soft drinks, and food that has
been prepared for immediate consumption) is taxed at the lower state tax rate of 1% plus applicable local taxes.
In contrast, alcoholic beverages, candy, soft drinks and food that has been prepared for immediate consumption
are taxed at the higher State sales tax rate of 6.25% plus applicable local taxes.
The regulation defines food as any solid, liquid, powder or item intended by the seller primarily for
human internal consumption, whether simple, compound or mixed, including foods such as condiments, spices,
seasonings, vitamins, bottled water and ice.
Beginning September 1, 2009, "soft drinks" mean non-alcoholic beverages that contain natural or
artificial sweeteners; but "soft drinks" do not include beverages that contain milk or milk products, soy, rice or
similar milk substitutes, or greater than 50% of vegetable or fruit juice by volume. Thus, if a beverage contains
a natural or artificial sweetener but also contains milk or milk products, soy, rice or similar milk substitutes, or
greater than 50% of vegetable or fruit juice by volume, it would not fall within the definition of “soft drink” but,
rather, it would fall within the definition of food.
Also beginning September 1, 2009, all candy became taxable at the State 6.25% general merchandise
rate. Candy is defined as a preparation of sugar, honey, or other natural or artificial sweeteners in combination
with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. Candy does
not include any preparation that contains flour or requires refrigeration. Thus, if a product contains flour or
requires refrigeration, it would not be considered “candy” even if it meets all the other elements of the
definition. Because the definition of candy changed in September 1, 2009, the tax treatment of certain products
went from the low 1% rate to the State 6.25% general merchandise rate.
I hope this information is helpful. If you require additional information, please visit our website at
www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel