Were Shaved Ice Flavor Packets exempt food products for Texas sales-tax purposes?

Plain-English summary

A company acting as Texas's collection agent for products sold through Texas distributors asked whether Shaved Ice Flavor Packets were exempt food products. The company collected tax on taxable items sold to distributors using the suggested retail selling price.

The Comptroller said the packets were taxable. Although Rule 3.293 exempted qualifying food products, its definition excluded carbonated and noncarbonated packaged soft drinks and diluted juices.

The ruling body addresses only Shaved Ice Flavor Packets. It does not decide the tax treatment of powder drink mixes or food bars despite the broader STAR subject label.

What this means for you

The product's classification under the food rule controlled. A seller could not treat the flavor packets as exempt food when they fell within the rule's excluded drink categories.

Common questions

Were the flavor packets exempt? No.

Why were they taxable? The Comptroller said they were not “food products” under Rule 3.293 because packaged soft drinks and diluted juices were excluded.

How did the collection agent calculate tax on taxable distributor sales? Using the suggested retail selling price, according to the letter.

Did the ruling decide powder drink mixes or food bars? No. Those items are not discussed in the ruling body.

Citations and references

• 34 Tex. Admin. Code § 3.293(a)(6)(A) (food products)
• 34 Tex. Admin. Code § 3.293(a)(6)(B)(i) (packaged soft drinks and diluted juices)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9101L1071A10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

JOHN SHARP
Comptroller

January 29, 1991

Dear ****:

We have received your letter requesting clarification as to the
taxability of Shaved Ice Flavor Packets.

You indicated that your company has an agreement with this state
to act as the collection agent on all sales of ** products
sold
by Texas distributors. Therefore, you must collect tax on sales of
taxable items to your distributors based on the suggested retail selling
price.

Question: You state that you believe that Shaved Ice Flavor Pack-
ets are exempt from sales tax in Texas. You enclosed a copy
of sales literature for each product.

Answer: The Shaved Ice Flavor Packets are taxable because they are
not "food products" as defined in subsection (a) (6) (A) of
Comptroller's Rule 3.293 (Food; Food Products; Meals; Food
Service). Although "food products" are exempt from sales tax,
carbonated and non-carbonated packaged soft drinks and diluted
juices are not "food products" (Rule 3.293 [a] (6) (B) [i]).

I have enclosed Rule 3.293 Food; Food Products; Meals; Food Ser-
vice for your information.

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

Please feel free to contact me if you have any additional
questions. You may write me or call toll free 1-800-252-5555
(ext.3-4685) from anywhere in the United States or phone 512/463-4685.

Sincerely,
Julie Pesl
Tax Administration Division