Are dietary supplements and nutritional products sold through a direct-sales company subject to Kansas sales tax?

Plain-English summary

A company that distributes nutritional products, personal care products, and other consumer products in Kansas — through independent contractors who recruit other members — asked whether two of its products (dietary supplement / nutritional products) are subject to Kansas sales and use tax. It submitted the product labels for review and already collects and remits Kansas sales and use tax on behalf of its team members under an agreement with the Department.

The Department's answer: both products are taxable. Sales of these products are subject to Kansas sales tax. The reason is the same one Kansas applies to food generally: unlike many other states, Kansas taxes sales of groceries and food. So the products are taxable in Kansas whether or not they may be considered food in another state.

This is a companion to the near-identical ruling P-2002-070, which reached the same conclusion for another product from the same distributor on the same day. Together they confirm the Department's straightforward position: dietary supplements and nutritional products sold at retail in Kansas are taxable, and an item's "food" status in another state does not change that.

What this means for you

Sellers of supplements and nutritional products

A "dietary supplement" or "nutritional" label does not make a product exempt in Kansas. Because Kansas taxes food and groceries, these products are generally taxable at retail — regardless of how another state classifies them.

Direct-sales / MLM companies

Like this taxpayer, you may collect and remit Kansas sales and use tax centrally on behalf of your distributors under an agreement with the Department. The tax is due on these taxable retail sales either way.

Don't import another state's food exemption

Kansas applies its own rules. The fact that a supplement is exempt as food somewhere else has no effect on its Kansas taxability.

Common questions

Q: Are these dietary supplements subject to Kansas sales tax?
A: Yes. The Department advised that sales of both products are subject to Kansas sales tax.

Q: Why are they taxable when food is exempt in many states?
A: Unlike many other states, Kansas taxes sales of groceries and food, so the products are taxable regardless of whether they would be considered food elsewhere.

Q: We sell through independent distributors — who remits the tax?
A: This company collects and remits Kansas sales and use tax on behalf of its team members under an agreement with the Department; the tax is due on these taxable sales in any event.

Q: Does this ruling apply to my products?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and products and cannot be relied on as precedent by others, though it reflects the Department's general position that food and grocery items are taxable in Kansas. (A companion ruling, P-2002-070, reaches the same conclusion for another product.)

Citations and references

• The Department's determination rests on the general rule that Kansas taxes sales of groceries and food (unlike many other states); the letter cites no specific statutory subsection.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2002-069

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 15, 2002

XXXX
XXXX
XXXX

RE: Your letter dated July 26, 2002

Dear XXXX:

Thank you for your recent letter. You company distributes nutritional products, personal car products and other consumer products in Kansas. You distribute these products through independent contractors, who recruit other members. You company collects and remits Kansas sales and use tax on behalf of the team members, pursuant to an agreement between your company and this department.

You ask if two of your products, XXXXX and XXXXX, are subject to sales and use tax. You provided their product labels for review. Please be advised that sales of these products are subject Kansas sales tax. Unlike many other states, Kansas taxes sales of groceries and food. Accordingly, the sale of your products are taxable in Kansas, whether or not they may be considered to be food in another state.

I hope that my letter adequately answers your questions. If you have more, please call me at 785-296-3081 and we can discuss them. This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 08/19/2002 Date Modified: 08/19/2002

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