A distributor complained that Metabolife was still charging sales tax on now-exempt vitamins/supplements, and that the company required a minimum sales volume before letting distributors buy tax-free. Is that correct?

Plain-English summary

A distributor for Metabolife (a network marketing company) wrote to the Comptroller reporting two problems, months after the new over-the-counter drugs and medicines exemption (Senate Bill 441, effective April 1, 2000) went into effect: (1) Metabolife was still collecting sales tax on its vitamins and nutritional supplements, which the exemption covers, and (2) the company had told distributors they couldn't buy vitamins and supplements tax-free unless they were a "premier" (mall) distributor or a "standard" distributor with average monthly sales of $8,000 or more.

The Comptroller confirmed both practices were wrong:

• Metabolife owed no sales tax collection duty at all on vitamins, minerals, and nutritional supplements for humans sold in Texas to distributors or other customers on or after April 1, 2000. The Comptroller had already separately notified Metabolife directly to stop collecting this tax — but apparently the message hadn't fully taken effect in practice.
• The distribution-tier requirement was invalid. Any distributor or person may purchase vitamins and nutritional supplements tax-free — there's no minimum sales volume or distributor-tier gate. No exemption or resale certificate is even required from the purchaser, because these items are simply exempt outright once sold on or after April 1, 2000.

The Comptroller forwarded a copy of this response directly to Metabolife to try to resolve the matter so distributors would stop being incorrectly charged.

What this means for you

Distributors for direct sales/MLM companies selling vitamins or supplements

You shouldn't be charged sales tax on qualifying vitamins, minerals, or nutritional supplements regardless of your distributor tier or sales volume — there's no "premier" or "standard" distributor gate to buying these items tax-free. If a company tells you otherwise, this letter is a real Comptroller confirmation that such conditions are incorrect.

Direct sales/MLM companies

Don't gate a legitimate statutory tax exemption behind internal distributor-tier or sales-volume requirements — the exemption applies to any purchaser once the item qualifies, without needing an exemption or resale certificate. If the Comptroller has already told your company to stop collecting tax on an exempt product line, make sure that instruction has actually propagated through your systems and distributor communications.

Accountants and tax professionals

Useful confirmation that once an item category becomes categorically exempt (like OTC drugs/medicines here), no certificate is required from the buyer at all — the seller simply shouldn't charge tax, and a company's own internal eligibility tiers can't override that.

Common questions

Q: Does a distributor need to meet a sales volume threshold to buy exempt vitamins/supplements tax-free?
A: No. Any distributor or person may purchase vitamins and nutritional supplements tax-free — there's no premier/standard distributor-tier requirement.

Q: Do I need an exemption or resale certificate to buy these items tax-free?
A: No. These items are simply exempt outright when sold on or after April 1, 2000 — no certificate is required from the purchaser.

Q: What if a company is still charging tax on these products?
A: That's incorrect if the products are qualifying vitamins, minerals, or nutritional supplements for humans sold on or after April 1, 2000. Companies have been directly notified to stop collecting tax on these exempt items.

Q: Can I rely on this letter for my own situation?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

No Texas Tax Code section or administrative rule is cited by number in the original letter (references Senate Bill 441 by name).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200008583L

Original ruling text

August 10, 2000

Dear **:

Thank you for your letter concerning the exemption by Senate Bill 441 of
over-the-counter drugs and medicines effective April 1, 2000. This exemption
includes vitamins and nutritional supplements. You stated that Metabolife is
still collecting sales tax on exempt vitamins and nutritional supplements.

Metabolife is not required to collect sales tax on any vitamins, minerals, and
nutritional supplements for humans sold in Texas to distributors or other
customers on or after April 1, 2000. We have previously notified Metabolife to
cease collecting sales tax on its vitamins, minerals, and nutritional
supplements since the exemption went into effect.

The information you got from the company regarding not being able to purchase
vitamins and nutritional supplements tax-free without being a premier
distributor (mall distributor) or a standard distributor (average monthly sales
of $8,000 or more) is no longer correct. Any distributor or person may now
purchase vitamins and nutritional supplements tax-free. An exemption or resale
certificate from the purchaser is not required because these items are simply
exempt when sold on or after April 1, 2000. I have forwarded a copy of this
response to Metabolife. Hopefully, this will resolve the matter so
distributors will no longer be charged sales tax on exempt products.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division

cc: **, Metabolife
****, Metabolife