Did Illinois classify a sweetened liquid mental-clarity supplement as food, a soft drink, or medicine?

Plain-English summary

The GIL did not expressly decide whether the liquid mental-clarity supplement was food, a soft drink, or medicine. It provided the definitions that controlled the 2010 State rate.

A sweetened nonalcoholic beverage was a “soft drink” unless it contained milk or milk products, soy, rice, or a similar milk substitute, or more than 50% fruit or vegetable juice by volume. Soft drinks used the general-merchandise rate stated in the letter.

Food intended primarily for human consumption generally used the lower rate when it did not fall into an excluded category. A product could qualify as a drug or medicine if its label claimed it would cure or treat disease, illness, injury, or pain, or mitigate the symptoms of one of those conditions.

Because the response did not reproduce or apply the product's ingredients and label claims, the final classification remains unresolved on the published text.

What this means for you

Classify a liquid supplement from its complete ingredients, juice percentage, sweeteners, milk-substitute content, intended use, and exact label claims. Do not infer a medicinal classification from a marketing name such as “mental clarity.”

Common questions

Q: Did the Department say the product was a soft drink?
A: No. It gave the definition without expressly applying it.

Q: Did calling it a dietary supplement make it medicine?
A: No. The GIL focused on medicinal claims stated on the label.

Q: Are the rates in the letter current?
A: No current-rate conclusion is provided here; the page reports the historical rates in the 2010 GIL.

Subject

Food

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0127.pdf

Original ruling text

ST 10-0127-GIL 12/27/2010 FOOD
Effective September 1, 2009, "soft drinks" mean non-alcoholic beverages that contain natural
or artificial sweeteners; but "soft drinks" do not include beverages that contain milk or milk
products, soy, rice or similar milk substitutes, or greater than 50% of vegetable or fruit juice by
volume. See 35 ILCS 120/2-10. (This is a GIL.)

December 27, 2010

Dear Xxxxx:
This letter is in response to your letter dated December 15, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
ABC sells nutritional, dietary, and skin care products through a multi-level network of
independent distributors. ABC is considered an ‘MLM’ or multi-level marketer such as
Amway. Our physical location is in CITY/STATE. ABC charges sales tax based upon
the address to which we ship and based upon suggested retail price, with one minor
exception. Orders which have been certified for personal usage by our distributors and
are less than $500 retail value are taxed based upon wholesale pricing. ABC files one
consolidated state sales/excise tax return in lieu of each independent distributor filing a
separate return with your state.
We are launching a new product in February 2011. The new product is a ‘mental clarity’
dietary supplement in liquid form. I am requesting a formal ruling on the taxability of this
new product. I have included a copy of the product label to assist in the ruling.
Please send the letter ruling or binding opinion by mail or e-mail to my attention. If you
need additional information, please contact me by phone.
Thank you for your assistance in this matter.

DEPARTMENT’S RESPONSE:
Please note the Department’s response is limited to your question regarding the State tax rate
applicable to the product you have referenced.
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. Illinois imposes a Use Tax on the privilege of using in this State any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These two taxes are complimentary in nature and together are commonly referred to as the
“sales tax”. The sales tax rate is 6.25%, plus any applicable local taxes.
For your information and reference, the Department’s regulations on the reduced tax rate
under the Retailers’ Occupation Tax Act applicable to food, drugs, medicines, medical appliances and
grooming and hygiene products can be found on the Department’s website at www.tax.illinois.gov.
The regulation on Foods, Soft Drinks and Candy can be found at 86 Ill. Adm. Code 130.310. The
regulation on Drugs, Medicines, Medical Appliances, and Grooming and Hygiene Products can be
found at 86 Ill. Adm. Code 130.311.
Alcoholic beverages, soft drinks, candy, and food that is prepared for immediate consumption
are taxed at the regular sales tax rate of 6.25%, plus any applicable local taxes. Generally, a 1%
sales tax rate, plus any applicable local taxes, is applied to food prepared for consumption off the
premises where sold.
Food is defined as “any solid, liquid, powder or item intended by the seller primarily for human
consumption, whether simple, compound or mixed, including foods such as condiments, spices,
seasonings, vitamins, bottled water and ice.” See Section 130.310(c)(1). Beginning September 1,
2009, "soft drinks" means non-alcoholic beverages that contain natural or artificial sweeteners; but
"soft drinks" does not include beverages that contain milk or milk products, soy, rice or similar milk
substitutes, or greater than 50% of vegetable or fruit juice by volume. Section 130.310(d)(6).
Those products that qualify as drugs, medicines and medical appliances also are taxed at a
lower State rate of 1% plus any applicable local taxes. Those items that do not qualify for the low rate
of tax are taxed at the general merchandise rate of 6.25% plus applicable local taxes. A medicine or
drug is any pill, powder, potion, salve, or other preparation for human use that purports on the label to
have medicinal qualities. A written claim on the label that a product is intended to cure or treat
disease, illness, injury or pain, or to mitigate the symptoms of such disease, illness, injury or pain
constitutes a medicinal claim. See Section 130.311 for examples of medicinal claims. Examples of
qualifying products include prescription drugs or medicines and nonprescription drugs or medicines
such as aspirin or other pain relievers that purport on the label to have medicinal qualities.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk