Did Illinois treat a two-ounce 5-Hour Energy dietary supplement as reduced-rate food or a full-rate soft drink?

Plain-English summary

The Department treated the described 5-Hour Energy product under Illinois's soft-drink rule, not the reduced-rate food rule. The convenience-store operator argued that the two-ounce product was labeled as a dietary supplement, contained vitamins, and lacked a natural or artificial sweetener.

The Department focused on the product label and Regulation 130.310. It noted that the product contained sucralose, which the regulation listed as a sweetener. The regulation also specifically listed sport or energy drinks as examples of soft drinks.

The letter's heading states that soft drinks were subject to the historical 6.25% State rate. The response did not accept the requester's premise that the product contained no sweetener.

What this means for you

For the 2011 rule, a dietary-supplement label, vitamin content, and small serving size did not resolve the rate. Retailers needed to check the actual ingredients and the regulation's product examples. A formula change—especially whether the product contains a listed sweetener—could change the analysis.

Common questions

Q: Why did the Department treat the product as a soft drink?
A: It contained sucralose, and the regulation listed both sucralose as a sweetener and energy drinks as soft-drink examples.

Q: Did the dietary-supplement label control?
A: The response did not base the result on that label; it applied Illinois's ingredient and product-category rule.

Q: What State rate did the historical letter identify?
A: 6.25% for soft drinks under the 2011 rule.

Subject

Food

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0037.pdf

Original ruling text

ST 11-0037-GIL 05/24/2011 FOOD
This letter concerns the 6.25% State rate of tax applicable to soft drinks. 86 Ill. Adm. 130.310.
(This is a GIL.)

May 24, 2011

Dear Xxxxx:
This letter is in response to your letter dated May 3, 2011, 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 and its Illinois convenience stores, respectfully request a letter ruling from the
Illinois Department of Revenue regarding the application of the Retailers' Occupation
Tax to products known as 5 Hour Energy.
Issue:
Whether 5 Hour Energy Dietary Supplements purchased from a ABC store are subject
to the General Merchandise (high) tax rate in Illinois or the Qualifying Food and Drug
(low) rate of tax.
To the best of ABC’s, knowledge, the State has not issued a letter ruling on this matter
before.
Facts:
ABC is a convenience store grocer that has stores in various locations throughout
Illinois. ABC generally accepts food stamps in its stores and does not provide on-site
eating facilities. The IBT number for ABC, is #, which is not under audit currently. ABC
stores carry a combination of items subject to the General Merchandise (high) tax rate
in Illinois or the Qualifying Food and Drug (low) rate of tax.
In particular, ABC stores sell a product called 5 Hour Energy. Per the manufacturer, 5
Hour Energy products are labeled and classified by the Federal Food and Drug
Administration (FDA) as a dietary supplement. 5 Hour Energy has a high concentration

of B12 and B6 vitamins and is 2 ounces in size. Please see the attached 5 Hour Energy
product label sample which includes the ingredients label.
Discussion:
ABC believes the 5 Hour Energy products are subject to the low tax rate in Illinois. The
product’s classification as a dietary supplement by the FDA, combined with the high
concentration of B12 and B6 vitamins along with the small 2 oz. liquid size all indicate
that this product is a food supplement/ vitamin. Please reference Illinois Administrative
Code §130.310(c)(1). Food, Soft Drinks and Candy. ‘Food is any solid, liquid, powder
or item intended by the seller primarily for human internal consumption, whether simple,
compound or mixed, including foods such as condiments, spices, seasonings, vitamins,
bottled water and ice.’
Additionally, a review of the 5 Hour Energy products as a ‘soft drink’ subject to high tax,
shows that this product fails to meet the State’s definition of soft drink. Pursuant to 86
ILAC 130.310(d)(6)(B), ‘the term ‘soft drinks’ means nonalcoholic beverages that
contain natural or artificial sweeteners. While 5 Hour Energy products are nonalcoholic, they do not contain natural or artificial sweeteners. The ingredients label
states that the product contains ‘natural and artificial flavors’ but 86
ILAC130.310(d)(6)(C) [sic] notes that the definition of ‘natural and artificial sweeteners
do not include natural or artificial flavors.’
Conclusion:
ABC respectfully requests that the Illinois Department of Revenue find that 5 Hour
Energy products purchased from a ABC store are subject to the Qualifying Food and
Drug (low) rate of tax.

DEPARTMENT’S RESPONSE:
Please see the Department’s Regulation entitled “Food, Soft Drinks and Candy” at 86 Ill. Adm.
Code 130.310 which can be found on the Department’s website. As you can see in the regulation,
"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. This regulation contains
examples of various sweeteners, one of which is “sucralose”. I noticed sucralose is contained in the
product about which you inquired. In addition, this regulation contains examples of products that fall
within the definition of “soft drinks” and specifically lists sport or energy drinks as an example of a soft
drink. 86 Ill. Adm. Code 130(e)(D)(iv).
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,

Debra M. Boggess
Associate Counsel
DMB:msk