Ezel / Tax Rulings / TX
TX 8907L0950F10 Sales and/or Use Tax (State,Local,MTA) 1989-07-18

Was packaged horchata exempt as a food product because it could be used in place of milk?

Short answer: No. The submitted literature described the non-dairy rice drink as a soft drink, so the Comptroller treated it as taxable rather than an exempt food product.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The submitted materials described horchata as a non-dairy rice drink made from rice, cinnamon, and spices. They also described it as a milk substitute, soft drink, and beverage sold in several flavors.

The Comptroller treated the product as taxable because the seller's own literature characterized it as a soft drink. The letter said packaged carbonated and noncarbonated soft drinks and diluted juices were outside the “food product” exemption.

Common questions

Did possible use as a milk substitute make the drink exempt? No.

What description controlled the answer? The submitted literature's description of horchata as a soft drink.

Was the answer fact-specific? Yes. The letter expressly tied the opinion to the facts presented.

Source

Original ruling text

July 18, 1989

Dear ***:

Thank you for your inquiry regarding the taxability of Horchata.

Your letter and the literature you submitted both indicate that Horchata is a
"non-dairy rice drink". The product comes in a variety of flavors including
original, strawberry, banana, orange, and chocolate/cinnamon. The literature
also indicates that the product is made from rice, cinnamon, and spices and is
used in place of milk, as a soft drink, and as a beverage.

The Horchata is taxable because it isn't a "food product". Although "food
products" are exempt from sales tax, the Texas Tax Code provides that
carbonated and non-carbonated packaged soft drinks and diluted juices are not
"food products".

Therefore, the Horchata is taxable because it is a soft drink as indicated in
the literature that you submitted.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions, please contact Tax Correspondence. You may call
tollfree 1-800-252-5555, or our regular number is 512/463-4600. My extension is
3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence

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