What Illinois sales tax rate applies to a powdered drink-mix product marketed as a whole food?

Plain-English summary

A company (referred to here as COMPANY) wrote to the Illinois Department of Revenue asking for a sales-tax taxability determination on a specific product, described only as "PRODUCT" and categorized by the requester as a "whole food." The company asked the Department to review enclosed product labels and provide a determination of taxability, noting the product appeared to be a powder intended to be mixed with liquid.

The Department responded with a General Information Letter rather than resolving the specific product's classification as a binding matter. It explained the general framework: the Retailers' Occupation Tax Act imposes a 6.25% tax rate on gross receipts from sales of tangible personal property, unless a lower rate applies under Section 2-10 of the Act (35 ILCS 120/2-10). Food for human consumption that is to be consumed off the premises where it is sold is taxed at the lower 1% rate -- except for alcoholic beverages, food consisting of or infused with adult-use cannabis, soft drinks, and food prepared for immediate consumption, which remain subject to the general 6.25% rate.

The Department's regulation (86 Ill. Adm. Code 130.310(c)(1)) defines "food" broadly as any solid, liquid, powder, or item intended by the seller primarily for human internal consumption, including condiments, spices, seasonings, vitamins, bottled water, and ice. "Soft drinks" are defined as non-alcoholic beverages containing natural or artificial sweeteners, but the definition excludes beverages containing milk or milk products, soy, rice or similar milk substitutes, or more than 50% vegetable or fruit juice by volume -- such beverages fall back into the "food" category even if sweetened. Separately, "candy" is defined as a sugar/honey/sweetener-based preparation combined with chocolate, fruit, nuts, or other ingredients in bar, drop, or piece form, but explicitly excludes any preparation containing flour or requiring refrigeration.

Applying these definitions to the described product, the Department noted that beverage powders and dry mixes are not considered "soft drinks" under 86 Ill. Adm. Code 130.310(d)(6)(E)(i), and that powdered hot chocolate cocoa mix and other drink mixes are not considered "candy" under 86 Ill. Adm. Code 130.310(d)(7)(G)(vi). Because the product did not appear to be prepared for immediate consumption either, the Department stated that "it appears that this product may qualify for the lower 1% rate of tax on food." The letter is careful to hedge this conclusion ("it appears") rather than issuing a definitive binding determination, consistent with its status as a GIL rather than a Private Letter Ruling (PLR).

What this means for you

Food and beverage retailers, manufacturers, and grocers

If you sell a powdered or dry-mix product intended to be dissolved in liquid and consumed (like a drink mix or cocoa powder), this GIL is a useful data point: the Department has said such products are generally neither "soft drinks" nor "candy" under its regulations, meaning they may qualify for the lower 1% Illinois sales tax rate on food rather than the general 6.25% rate -- as long as the product isn't prepared for immediate consumption and doesn't otherwise fall into an excluded category (alcohol, cannabis-infused food, food prepared for immediate consumption). But because this is a GIL, not a PLR, you cannot rely on it to bind the Department as to your own specific product; if you need certainty, you would need to request a PLR under 2 Ill. Adm. Code 1200.110 and provide your own complete facts (including the actual product label and ingredients).

Accountants and tax professionals advising food/beverage clients

When classifying a client's product for Illinois sales tax purposes, walk through the same three-part test the Department used here: (1) Is it "food" under 86 Ill. Adm. Code 130.310(c)(1) -- broadly, anything intended primarily for human internal consumption? (2) Does it fall within the "soft drinks" carve-out (a sweetened non-alcoholic beverage that does NOT contain milk/milk substitutes or more than 50% juice)? (3) Does it meet the "candy" definition (sweetener + chocolate/fruit/nuts in bar/drop/piece form, without flour or a refrigeration requirement)? Powders and dry mixes are treated differently than ready-to-drink beverages -- they are excluded from both the "soft drink" and "candy" categories by specific regulatory carve-outs, which can make the 1% rate available even for sweetened products.

Anyone relying on this specific letter

Remember this GIL doesn't identify the actual product beyond the placeholder "PRODUCT," doesn't attach the label the company referenced, and only says the product "may qualify" and "appears" to meet the 1% rate -- language that stops short of a firm determination. Don't assume every powdered product automatically gets the 1% rate; the specific ingredients and marketing of your product still matter, and a self-serve reading of this GIL is not a substitute for your own tax research or a PLR request.

Common questions

Q: What is Illinois's general sales tax rate, and what's the lower rate for food?
A: The general Retailers' Occupation Tax rate is 6.25% of gross receipts on tangible personal property sales. Food for human consumption to be eaten off the premises where sold is taxed at a lower 1% rate, unless it's alcohol, cannabis-infused food, a "soft drink," or food prepared for immediate consumption -- all of which stay at 6.25%. (35 ILCS 120/2-10)

Q: Are powdered drink mixes taxed as "soft drinks" in Illinois?
A: No. The Department's regulations specifically state that beverage powders and dry mixes are not considered "soft drinks," regardless of whether they contain sweeteners. (86 Ill. Adm. Code 130.310(d)(6)(E)(i))

Q: Is powdered cocoa or a similar drink mix taxed as "candy"?
A: No. The regulations specifically exclude powdered hot chocolate cocoa mix and other drink mixes from the definition of "candy." (86 Ill. Adm. Code 130.310(d)(7)(G)(vi))

Q: Did the Department definitively rule that this particular product qualifies for the 1% rate?
A: Not with full certainty -- the letter says the product "appears" to qualify for the lower 1% rate based on the facts described, which is consistent with a GIL's non-binding, information-directing purpose rather than a binding PLR determination.

Q: Can the company that requested this letter rely on it if the Department later disagrees?
A: No. A GIL is not a statement of Department policy and is not binding on the Department, even for the requesting taxpayer. A business that needs a binding, reliable answer about its specific product should request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes:

• 35 ILCS 120/2-10 (Retailers' Occupation Tax Act -- 6.25% general rate; 1% rate for food for human consumption off-premises; exclusions for alcohol, cannabis-infused food, soft drinks, and food prepared for immediate consumption)

Regulations:

• 86 Ill. Adm. Code 130.310(c)(1) (definition of "food")
• 86 Ill. Adm. Code 130.310(d)(6)(B) (definition of "soft drinks")
• 86 Ill. Adm. Code 130.310(d)(6)(E)(i) (beverage powders and dry mixes are not "soft drinks")
• 86 Ill. Adm. Code 130.310(d)(7)(A) (definition of "candy")
• 86 Ill. Adm. Code 130.310(d)(7)(G)(vi) (powdered cocoa/drink mixes are not "candy")
• 86 Ill. Adm. Code 130.310(b) (tax rate may also depend on the nature of the selling establishment)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Note: the source PDF's truncated top-of-letter summary cites "35 ILCS 120/210," which omits a hyphen -- the actual statutory rate provision, cited correctly throughout the Department's full response, is 35 ILCS 120/2-10.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0016-GIL.pdf

Original ruling text

ST 24-0016-GIL 3/27/2024

FOOD

This letter discusses the State tax rate applicable to the sales of food. 35 ILCS 120/210; 86 Ill. Adm. Code 130.310. (This is a GIL.)

March 27, 2024
NAME
COMPANY
ADDRESS
Dear NAME:
This letter is in response to your letter dated January 31, 2024, in which you
requested 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. 2 Ill. Adm. Code
1200.120. You may access our website at https://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:
Please review the enclosed product labels for the item listed below and
provide us with a determination of sales taxability in your state. Please note
that this product is categorized as whole foods.
Product: PRODUCT
I will be happy to provide additional information if needed. Thank you for
your prompt attention to this matter. My email address is EMAILand that is
the best way to respond.
DEPARTMENT’S RESPONSE:

COMPANY Page 2
March 27, 2024
The Retailers’ Occupation Tax Act (“Act”) imposes a tax rate of 6.25% on gross
receipts from sales of tangible personal property made in the course of business, unless
otherwise specified in Section 2-10 of the Act. 35 ILCS 120/2-10. With respect to food
for human consumption that is to be consumed off the premises where it is sold (other
than alcoholic beverages, food consisting of or infused with adult use cannabis, soft
drinks, and food that has been prepared for immediate consumption), the tax is imposed
at the rate of 1%. 35 ILCS 120/2-10.
The Department’s regulation defines “food” as 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. 86 Ill. Adm. Code 130.310(c)(1).
The term “soft drinks” means non-alcoholic beverages that contain natural or
artificial sweeteners. “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. 35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(6)(B). Thus, if a
beverage contains a natural or artificial sweetener but also contains milk or milk products,
soy, rice, or similar milk substitutes, or greater than 50% of vegetable or fruit juice by
volume, it would not fall within the definition of “soft drink” but, rather, it would fall within
the definition of food.
“Food for human consumption that is to be consumed off the premises where it is
sold” includes all food sold through a vending machine, except soft drinks, candy, and
food products that are dispensed hot from a vending machine, regardless of the location
of the vending machine. “Food for human consumption that is to be consumed off the
premises where it is sold” does not include candy. 35 ILCS 120/2-10.
“Candy” is defined as a preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in
the form of bars, drops, or pieces. “Candy” does not include any preparation that contains
flour or requires refrigeration. 35 ILCS 120/2-10; 86 Ill. Adm. Code 130.310(d)(7)(A).
Thus, if a product contains flour or requires refrigeration, it would not be considered
“candy” even if it meets all the other elements of the definition.
It should be noted that the tax rate may also be impacted by the nature of the
selling establishment. See 86 Il. Adm. Code 130.310(b). It appears that the products
stated in your inquiry may be a powder which is intended to be mixed with liquid.
Beverage powders and dry mixes are not considered soft drinks. 86 Ill. Adm. Code
130.310(d)(6)(E)(i). Powdered hot chocolate cocoa mix and other drink mixes are not
considered candy. 86 Ill. Adm. Code 130.310(d)(7)(G)(vi). Therefore, this product would
not be a soft drink or candy. This product also does not appear to be for immediate
consumption. Based on this information, it appears that this product may qualify for the
lower 1% rate of tax on food.

COMPANY Page 3
March 27, 2024
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at (217) 782-3336.

Very truly yours,

Katarzyna
Kowalska
Associate Counsel
KK:sce