Do vitamins and dietary supplements qualify for Illinois's low 1% sales tax rate, or do they get taxed at the general 6.25% rate?

Subject

Food, Drugs, & Medical Appliances

Plain-English summary

An out-of-state retailer that had just registered for an Illinois sales tax permit wrote to the Illinois Department of Revenue asking about the correct tax rate for two dietary-supplement products it sells (sold and fulfilled through a third-party company). The retailer wanted to know whether its products qualified for the low 1% sales tax rate under 86 Ill. Adm. Code 130.310 or 130.311, or whether it needed to collect tax at the general 6.25% rate. It attached label images (Supplement Facts panels) to help the Department evaluate the products.

The Department responded with a General Information Letter (GIL) rather than a Private Letter Ruling, explaining the general rules rather than making a specific determination about the retailer's two named products. It explained that under 86 Ill. Adm. Code 130.310, food intended for off-premises consumption (other than alcoholic beverages, soft drinks, and food prepared for immediate consumption) is taxed at the low rate of 1% plus applicable local taxes. "Food" is defined broadly to include any solid, liquid, powder, or item intended by the seller primarily for human internal consumption -- and the regulation specifically lists vitamins as an example of a covered food item, along with condiments, spices, seasonings, bottled water, and ice.

Separately, under 86 Ill. Adm. Code 130.311, a "medicine or drug" is any pill, powder, potion, salve, or other preparation for human use that purports on its label to have medicinal qualities. If a vitamin, food supplement, or meal-replacement drink mix is for human use and its label makes medicinal claims, it is instead treated as a drug -- also taxed at the low rate.

The Department noted that most vitamins, food supplements, and meal-replacement drink mixes do not make medicinal claims on their labels, so they would typically qualify as "food" under 130.310 rather than "medicine or drug" under 130.311. Either way, the letter's overall point is that such products generally fall into one of these two low-rate categories, and only products that meet neither definition (or that are prepared by the vendor for immediate consumption) are taxed at the higher 6.25% general rate.

What this means for you

Sellers of vitamins, supplements, or meal-replacement products

If you sell vitamins, dietary supplements, or meal-replacement drink mixes into Illinois, check your product labels. If the label does not make medicinal claims, the product is likely treated as "food" under 86 Ill. Adm. Code 130.310 and taxed at the low 1% state rate plus applicable local taxes (rather than the general 6.25% rate), provided it isn't an alcoholic beverage, soft drink, or food prepared for immediate consumption. If your label does make medicinal claims, the product may instead qualify as a "medicine or drug" under 86 Ill. Adm. Code 130.311 -- which is also taxed at the low rate.

Retailers wanting certainty on specific products

This letter is a General Information Letter, not a Private Letter Ruling. The Department did not make a binding determination about the two specific products the requester named, even though label images were submitted. A retailer that wants a determination binding on the Department for its own specific product and facts would need to request a Private Letter Ruling under the Department's procedures at 2 Ill. Adm. Code 1200.110.

Common questions

Q: Are vitamins and dietary supplements taxed at Illinois's low sales tax rate?
A: Generally yes. The Department's regulation at 86 Ill. Adm. Code 130.310 defines "food" to include vitamins specifically, along with condiments, spices, seasonings, bottled water, and ice. Food consumed off the premises where sold (other than alcoholic beverages, soft drinks, and food prepared for immediate consumption) is taxed at 1% plus applicable local taxes.

Q: What if the supplement's label makes a medicinal claim?
A: Then it may instead be classified as a "medicine or drug" under 86 Ill. Adm. Code 130.311, which defines that term as any pill, powder, potion, salve, or other preparation for human use that purports on the label to have medicinal qualities. Medicines and drugs are also taxed at the low rate.

Q: Did the Department tell this specific retailer which rate applies to its two products?
A: No. The retailer submitted label images and asked for clarity on its specific products, but the Department responded with general guidance about how the "food" and "medicine or drug" definitions work rather than a product-specific determination. That is consistent with how a GIL functions -- it directs the taxpayer to the relevant regulations rather than resolving a specific factual situation.

Q: When would a vitamin or supplement be taxed at the higher 6.25% rate?
A: The letter indicates the higher rate applies to products that do not meet the definition of "food" (or "medicine or drug") or that are prepared by the vendor for immediate consumption. The Department noted that most vitamins, supplements, and meal-replacement drink mixes don't make medicinal claims and so would fall under the "food" definition rather than risk falling outside both categories.

Q: Is this letter binding on the Illinois Department of Revenue?
A: No. It is a General Information Letter, which under 2 Ill. Adm. Code 1200.120 is not a statement of Department policy and is not binding on the Department. It merely directs the taxpayer to the relevant regulations. A taxpayer who needs a binding answer must request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Q: Who signed this letter and what office issued it?
A: The letter was signed by Debra M. Boggess, Associate Counsel, on behalf of the Illinois Department of Revenue.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0030-gil.pdf

Original ruling text

ST 18-0030-GIL 11/21/2018 FOOD, DRUGS, & MEDICAL APPLIANCES
Items such as vitamins or dietary supplements are considered foods and may qualify for
the low State rate of tax. See 86 Ill. Adm. Code 130.310. (This is a GIL.)

November 21, 2018

Dear Xxxxx:
This letter is in response to your letter, in which you requested 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:
We are an out-of-state retailer who recently contacted the Illinois
Department of Revenue for a permit to collect and remit sales taxes in the
state of Illinois for the sale of our products which are processed and
fulfilled through COMPANY.
We only sell two products, which are Dietary Supplements:

1. PRODUCT
2. PRODUCT 1
   Information about these products can be found on: WEBSITE. We would
   like clarity on whether these two products qualify under the Illinois
   tax code for the 1% sales tax rate (based on 86 Ill. Adm. Code
   130.310 or 130.311), or if we need to collect sales tax at the 6.25%
   rate.

ST 18-0030-GIL
Page 2

We have attached images of the bottle labels which include Supplement
Facts panels to help your review and guidance.
DEPARTMENT’S RESPONSE:
Please review the Department’s regulation at 86 Ill. Adm. Code 130.310,
regarding the appropriate tax rates for food, soft drinks and candy. As you can see from
the regulation, food that is to be consumed off the premises where it is sold (other than
alcoholic beverages, soft drinks, and food that has been prepared for immediate
consumption) is taxed at the rate of 1% plus applicable local taxes. Food is defined 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. Products that do not meet the
appropriate definition of food or that are food prepared by the vendor for immediate
consumption, are taxable at the higher State sales tax rate of 6.25% plus applicable
local taxes.
A medicine or drug is defined as any pill, powder, potion, salve, or other
preparation for human use and that purports on the label to have medicinal qualities.
See 86 Ill. Adm. Code 130.311. Therefore, if vitamins, food supplements or meal
replacement drink mixes are for human use and purport on the label to have medicinal
qualities, such items are considered to be drugs and are taxed at the low rate of tax.
Since not many vitamins, food supplements or meal replacement drink mixes are likely
to make medicinal claims, they would not qualify as a medicine or drug, however, such
items would be considered to be food subject to 86 Ill. Adm. Code 130.310.
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
DMB:bkl