What Illinois sales tax rate applies to a whole-food-based powdered shake mix?

Plain-English summary

A company asked the Illinois Department of Revenue, in a letter dated September 28, 2021, to review the product labels for a "PRODUCT based shake mix" (described by the requester as a "whole foods" product) and provide a determination of Illinois sales taxability. Because the inquiry and the information provided called for a general response rather than a binding determination, the Department answered with a General Information Letter (GIL) rather than a Private Letter Ruling (PLR).

The Department's response walks through its "Food, Soft Drinks and Candy" regulation, 86 Ill. Adm. Code 130.310. Food intended for human consumption off the premises where it's sold -- other than alcoholic beverages, cannabis-infused food, soft drinks, candy, and food prepared for immediate consumption -- is taxed at the low state rate of 1% plus applicable local taxes, versus the general 6.25% state rate (plus local taxes) for candy, soft drinks, and food prepared for immediate consumption.

Applying the food, soft drink, and candy definitions, the Department explained that "food" means any solid, liquid, powder, or item intended by the seller primarily for human internal consumption -- including condiments, spices, seasonings, vitamins, bottled water, and ice (86 Ill. Adm. Code 130(c)(1)). "Soft drinks" are non-alcoholic sweetened beverages, but exclude drinks containing milk or milk products, soy, rice or similar milk substitutes, or more than 50% vegetable or fruit juice by volume (35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(6)(B)) -- and beverage powders and dry mixes are not considered soft drinks at all (86 Ill. Adm. Code 130.310(d)(6)(E)(i)). "Candy" means a sugar/honey/sweetener preparation combined with chocolate, fruits, nuts, or other ingredients in bar, drop, or piece form, excluding anything containing flour or requiring refrigeration -- and powdered hot chocolate cocoa mix and other drink mixes are specifically not considered candy (86 Ill. Adm. Code 130.310(d)(7)(G)(vi)).

Because the product in question appeared to be a powder intended to be mixed with liquid, the Department concluded it would not be a soft drink or candy, and did not appear to be for immediate consumption. Based on that, the Department stated the product "may qualify for the lower 1% rate of tax on food" -- a qualified, non-binding conclusion consistent with the GIL format, which does not commit the Department the way a PLR would.

What this means for you

Makers and sellers of powdered food/beverage-mix products

If you sell a powder or dry mix intended to be combined with liquid before consumption (a shake mix, drink mix, hot cocoa mix, etc.), this GIL is a useful data point: the Department's own regulations exclude beverage powders and dry mixes from the "soft drink" definition (86 Ill. Adm. Code 130.310(d)(6)(E)(i)) and exclude powdered cocoa/drink mixes from the "candy" definition (86 Ill. Adm. Code 130.310(d)(7)(G)(vi)). That means such products are more likely to fall under the general "food" definition and its preferential 1% state rate rather than the 6.25% rate for candy or soft drinks -- but this letter only says the requester's specific product "may qualify," not that it definitely does, so you cannot rely on this GIL to protect your own company's tax position.

Grocers and retailers of food products generally

Remember the rate structure described in this letter: food for off-premises consumption is taxed at the low 1% state rate plus local taxes, while candy, soft drinks, and food prepared for immediate consumption are taxed at the general 6.25% state rate plus local taxes. The letter also notes that the tax result can turn on "the nature of your selling establishment" under 86 Ill. Adm. Code 130.310(b), so how and where a product is sold matters, not just its ingredients.

Accountants and tax professionals

This GIL is a compact primer on the three-way food/soft-drink/candy classification framework in 86 Ill. Adm. Code 130.310, including the often-overlooked carve-outs that exclude beverage powders and dry mixes from both the "soft drink" and "candy" definitions. Because it is a GIL, it is not a statement of Department policy and is not binding -- a client needing a definitive, binding answer on their own product's classification should request a PLR under 2 Ill. Adm. Code 1200.110.

Common questions

Q: What Illinois sales tax rate applies to food?
A: Food intended for human consumption off the premises where it is sold -- other than alcoholic beverages, cannabis-infused food, soft drinks, candy, and food prepared for immediate consumption -- is taxed at the low state rate of 1% plus applicable local taxes. Candy, soft drinks, and food prepared for immediate consumption are taxed at the higher state sales tax rate of 6.25% plus applicable local taxes. See 86 Ill. Adm. Code 130.310.

Q: Does this GIL say the shake mix powder is definitely taxed at the 1% food rate?
A: Not definitively. The Department stated the product "may qualify for the lower 1% rate of tax on food" based on it being a powder intended to be mixed with liquid, not a soft drink or candy, and not for immediate consumption -- but a GIL is not binding on the Department, even for the requester.

Q: Are beverage powders and drink mixes taxed as "soft drinks" or "candy"?
A: No. Beverage powders and dry mixes are excluded from the "soft drink" definition (86 Ill. Adm. Code 130.310(d)(6)(E)(i)), and powdered hot chocolate cocoa mix and other drink mixes are excluded from the "candy" definition (86 Ill. Adm. Code 130.310(d)(7)(G)(vi)).

Q: How does "soft drink" differ from "food" for tax purposes?
A: "Soft drinks" are non-alcoholic beverages containing natural or artificial sweeteners, but the definition excludes beverages containing milk or milk products, soy, rice or similar milk substitutes, or more than 50% vegetable or fruit juice by volume -- those beverages are taxed as food instead. See 35 ILCS 120/2-10 and 86 Ill. Adm. Code 130.310(d)(6)(B).

Q: Can I rely on this GIL for my own similar product?
A: No. A GIL is not a statement of Department policy and is not binding on the Department, even for the taxpayer who requested it. See 2 Ill. Adm. Code 1200.120. A taxpayer wanting a binding answer must request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.310 (tax rate applicable to sales of food; definitions of food, soft drinks, and candy)
• 86 Ill. Adm. Code 130(c)(1) (definition of food)
• 86 Ill. Adm. Code 130.310(d)(6)(B) (definition of soft drinks)
• 86 Ill. Adm. Code 130.310(b) (tax impact depends on nature of selling establishment)
• 86 Ill. Adm. Code 130.310(d)(6)(E)(i) (beverage powders and dry mixes not considered soft drinks)
• 86 Ill. Adm. Code 130.310(d)(7)(G)(vi) (powdered cocoa mix and other drink mixes not considered candy)

Statutes:

• 35 ILCS 120/2-10 (Retailers' Occupation Tax Act definitions, including soft drinks and candy)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2021.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2021/st21-0046-gil.pdf

Original ruling text

ST-21-0046 11/16/2021 FOOD
This letter discusses the State tax rate applicable to sales of food. See 86 Ill. Adm.
Code 130.310. (This is a GIL.)
November 16, 2021
NAME/ADDRESS
Dear NAME:
This letter is in response to your letter dated September 28, 2021, 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:
Please review the enclosed product labels for the item listed below and
provide us with a determination of sales taxability in your state. Please note
that this product is categorized as whole foods.
Product:

PRODUCT based shake mix

I will be happy to provide additional information if needed. Thank you for
your prompt attention to this matter.
Your assistance is appreciated.
DEPARTMENT’S RESPONSE:
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 for human consumption that is to be consumed off the premises
where it is sold (other than alcoholic beverages, food consisting of or infused with adult
use cannabis, soft drinks, candy and food that has been prepared for immediate
consumption) is taxed at the lower state tax rate of 1% plus applicable local taxes. In

BUSINESS
Page 2
November 9, 2021
contrast, 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.
86 Ill. Adm. Code 130(c)(1).
The term “soft drinks” means non-alcoholic beverages that contain natural or
artificial sweeteners. "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. 35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(6)(B). 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.
“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.
Please be aware that the tax can also be impacted by the nature of your selling
establishment. Please see 86 Ill. Adm. Code 130.310(b). It appears that the product may
be a powder which is intended to be mixed with liquid. Beverage powders and dry mixes
are not considered soft drinks. See 86 Ill. Adm. Code 130.310(d)(6)(E)(i). Powdered hot
chocolate cocoa mix and other drink mixes are not considered candy. See 86 Ill. Adm.
Code 130.310(d)(7)(G)(vi). Therefore, this product would not a soft drink or candy. This
product also does not appear to be for immediate consumption. Based on this information,
it appears that this product may qualify for the lower 1% rate of tax on food.
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,
Alexis K. Overstreet
Associate Counsel