Are energy-enhancing gels and chews packaged and labeled as dietary foods and health supplements subject to New York sales tax?

Plain-English summary

A company that markets and distributes energy-enhancing gels and chews — the kind athletes use before, during, or after intense exercise — asked whether its sales are subject to New York sales tax. The Department concluded they are exempt.

New York taxes retail sales of tangible personal property (Tax Law § 1105(a)), but Tax Law § 1115(a)(1) exempts "food, food products, beverages, dietary foods and health supplements, sold for human consumption." A dietary food is a food for a special dietary use that states its dietary properties on the label (20 NYCRR 528.2(c)(1)); products that substitute for, or supplement, the ordinary diet — like liquid diet products, artificial sweeteners, and vitamins — are exempt when sold for human consumption (20 NYCRR 528.2(c)(2)).

Here, the products' labels highlighted their dietary properties — energy-dense carbohydrates, electrolytes, and/or vitamins — and stated that they are intended to increase the user's energy, with either a "Nutrition Facts" or a "Supplement Facts" panel. Because they are packaged, labeled and sold as dietary foods and supplements for human consumption, the Department treated them as exempt under § 1115(a)(1).

Note the limit: the holding turns on how these particular products were packaged and labeled. The opinion does not say all energy products are exempt — the label's statement of dietary properties is what drove the result.

What this means for you

Makers and sellers of supplements, energy, and nutrition products

If your product is packaged and labeled as a dietary food or health supplement — with a Supplement Facts or Nutrition Facts panel and a statement of the dietary properties it is based on — New York is likely to treat it as exempt food under § 1115(a)(1). The labeling is doing the legal work here, so keep it accurate and consistent with how you market the product.

The line between exempt supplements and taxable candy or snacks

Compare this with New York's candy rule: a product sold as candy or confectionery is taxable even if it has nutritional value. Whether a product reads as a "dietary food/supplement" versus "candy" or an ordinary snack can flip the tax result, so the label and the normal use of the product matter.

Accountants and tax professionals

The exemption rests on Tax Law § 1115(a)(1) and the dietary-food definition in 20 NYCRR 528.2(c)(1)–(2). Document the Supplement/Nutrition Facts panel and the stated dietary properties in your files; the Department leaned directly on those label features.

Common questions

Q: Are energy gels and chews taxable in New York?
A: In this opinion, no. Products packaged, labeled and sold as dietary foods and health supplements for human consumption are exempt under Tax Law § 1115(a)(1).

Q: What made these products exempt?
A: Their labels highlighted dietary properties (energy-dense carbohydrates, electrolytes, vitamins) and stated they are intended to increase the user's energy, with a Nutrition Facts or Supplement Facts panel — the hallmarks of a dietary food or supplement.

Q: Does this mean every energy or nutrition product is exempt?
A: No. The result turned on these specific products' packaging and labeling. A product sold and marketed as candy or an ordinary snack can be taxable.

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the Department's reasoning, then check it against your own facts.

Citations and references

New York Tax Law and regulations:
- Tax Law § 1105(a) — sales tax on retail sales of tangible personal property
- Tax Law § 1115(a)(1) — exemption for food, food products, beverages, dietary foods and health supplements
- 20 NYCRR 528.2(c)(1) — definition of "dietary food"
- 20 NYCRR 528.2(c)(2) — products that substitute for or supplement the ordinary diet

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
• Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-10s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-10s.pdf

Original ruling text

Sales Tax
July 30, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ], located at [ redacted ] (Petitioner). Petitioner asks whether receipts from the sales of various products that it markets and distributes as energy enhancing gels and chews are subject to State and local sales and use taxes.

We conclude that the products Petitioner sells as energy enhancing gels and chews that are packaged, labeled and sold as dietary foods and health supplements are exempt from State and local sales and use taxes.

Facts

Petitioner sells a variety of products used in athletic and recreational activities. Petitioner sells a variety of products packaged and labeled as energy enhancement gels and/or chews. Petitioner included with its Advisory Opinion Request the packaging and labels of the energy gels and chews at issue. In varying ways, all of the products are packaged and sold as portable energy enhancement products for consumption before, during or after intense physical activity and exercise. Each product’s packaging lists its ingredients and, depending on the product, either a “Nutrition Facts” or a “Supplement Facts” panel that states the recommended daily percentage values of the ingredients contained in the product.

Analysis

All retail sales of tangible personal property are subject to sales tax pursuant to Tax Law § 1105(a), unless otherwise exempted. Tax Law § 1115(a)(1) provides an exemption for “[f]ood, food products, beverages, dietary foods and health supplements, sold for human consumption ....”   A dietary food is a food for a special dietary use for humans that bears on the label a statement of the dietary properties upon which its use is based in whole or in part. See NYCRR 528.2(c)(1).  Products that are intended to substitute for the ordinary diet, supplement the ordinary diet, or substitute for natural foods are exempt when sold for human consumption. Among these are liquid diet products, artificial sweeteners and vitamins. 20 NYCRR 528.2(c)(2). The labels of products Petitioner sells that are the subject of this Petition highlight their dietary properties (e.g. energy-dense carbohydrates, electrolytes, and/or vitamins, etc.), and that they are intended to increase the user's energy. Accordingly, these particular products are considered dietary foods or supplements exempt from State and local sales tax pursuant to Tax Law § 1115(a)(1).

DATED: July 30, 2024

Mary Ellen Ladouceur
Principal Attorney

Note: An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth therein and is binding on the Department only with respect to the person or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect as of the date the Opinion is issued or for the specific time period at issue in the Opinion. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.