Are a multi-level marketer's soy-based women's nutritional supplement sales exempt from New York sales tax as a dietary food or health supplement?

Plain-English summary

Reliv, Inc., a multi-level marketer of nutritional, dietary, and skin-care products, asked whether its "SoySentials" product is subject to New York sales tax. Per the product label, SoySentials is a daily supplement for women, built around soy protein plus a mix of herbs, vitamins, and anti-oxidants formulated to address nutritional gaps in a typical diet and support certain women's health concerns.

New York exempts "food, food products, beverages, dietary foods and health supplements" sold for human consumption. The Department's own regulation defines a "dietary food" as one labeled with a statement of its special dietary purpose, and covers products meant to supplement (not just replace) the ordinary diet, giving vitamins as an explicit example. Comparing SoySentials to the taxable/exempt product examples in the Department's own retail-food publication, the Department found SoySentials fits both the dietary-food and health-supplement categories, and is therefore exempt -- consistent with an earlier 1997 opinion (TSB-A-97(76)S) that reached the same conclusion for other Reliv products.

What this means for you

Sellers of vitamins, supplements, and nutritional products (including multi-level marketers)

A product marketed as supplementing the ordinary diet -- with a label describing its dietary purpose, ingredients like vitamins, herbs, or protein concentrates, and health-support claims -- is likely to qualify for New York's food/dietary-food/health-supplement exemption, regardless of your distribution model (retail store, mail order, or a multi-level marketing network of independent distributors).

Accountants and tax professionals

The Department leans on its own Publication 880 (Taxable and Exempt Foods and Beverages) as a comparison tool, and on the two-factor test in 20 NYCRR § 528.2(c): the product must (1) carry a label statement of its special dietary purpose and (2) supplement, substitute for, or replace part of the ordinary diet. This is a good template ruling for any single-product dietary-supplement exemption question.

Common questions

Q: Does the exemption depend on how the product is sold (retail store vs. multi-level marketing distributors)?
A: No -- the analysis in this ruling turns entirely on the product's labeling and nutritional purpose, not on the sales channel.

Q: What makes a product a "dietary food" versus an ordinary taxable snack or beverage?
A: The product's label must state the dietary purpose on which its special use is based, and the product must be intended to supplement, substitute for, or replace part of the ordinary diet -- vitamins are specifically listed as a qualifying example in the Department's regulation.

Q: Does this ruling cover all of Reliv's other products too?
A: No -- it's limited to the specific SoySentials product described; other products would need their own labels and facts reviewed, though the Department noted a prior 1997 ruling reached the same exempt result for other Reliv products.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (imposition of sales tax)
• Tax Law § 1115(a)(1) (food, dietary foods, and health supplements exemption)
• 20 NYCRR § 528.2(c) (dietary foods and health supplements)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1999.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a99_4s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(4)S
Sales Tax
January 27, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S981103F

On November 3, 1998, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Reliv, Inc., P.O. Box 405, Chesterfield, MO 63006-0405.
The issue raised by Petitioner, Reliv, Inc., is whether receipts from the sales of its product
called "SoySentials" are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner sells nutritional, dietary, and skin care products through a multi-level network of
independent distributors. Petitioner is considered an "MLM," or multi-level marketer, which ships
its products to various New York distributors for sale.
Petitioner submitted the label from its SoySentials product for review. SoySentials is
described on the label as a women’s daily protective supplement designed to meet the special
nutritional needs of women which are not always met through regular diet. SoySentials provides
soy protein, described on the label as "nature’s magic bean" that can help combat some of the most
serious health problems facing women today. According to the label, SoySentials also provides a
wide array of herbs, vitamins and potent anti-oxidants specifically formulated for a woman’s special
nutritional needs.
Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes sales tax on "[t]he receipts from every retail sale
of tangible personal property, except as otherwise provided in this article."
Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating
use tax imposed under section eleven hundred ten:
(1) Food, food products, beverages, dietary foods and health supplements,
sold for human consumption . . . .
Section 528.2(c) of the Sales and Use Tax Regulations provides:

-2­
TSB-A-99(4)S
Sales Tax
January 27, 1999

Dietary foods and health supplements. (1) A dietary food is a food for a
special dietary use for humans and which bears on the label a statement of the dietary
properties upon which its use is based in whole or in part.
(2) Products which are intended to substitute for the ordinary diet, or
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.
Opinion
According to the label on Petitioner’s product, SoySentials is designed to supplement a
woman’s regular diet by supplying soy protein and other natural herbs, vitamins and potent anti­
oxidants specifically formulated for a woman’s special nutritional needs. The nutrients in
SoySentials are said to help combat some of the most serious health problems facing women today.
New York State Department of Taxation and Finance Publication 880, Taxable and Exempt
Foods and Beverages Sold at Retail Food Markets and Similar Establishments, contains a partial list
of foods and beverages that are taxable or exempt from sales and use taxes when sold at retail food
markets and similar establishments. SoySentials is similar to certain other products listed in
Publication 880 which are not taxed for sales tax purposes. SoySentials is considered both a dietary
food and a health supplement in accordance with Section 1115(a)(1) of the Tax Law and Sections
528.2(c)(1) and (2) of the Sales and Use Tax Regulations and is therefore exempt from sales tax (see
Reliv, Inc., Adv Op Comm T&F, December 4, 1997, TSB-A-97(76)S).

DATED: January 27, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.