A company sells eleven different edible products. Which ones are taxed at Tennessee's lower 'food and food ingredients' rate, and which count as 'candy' (or dietary supplements) and are taxed at the higher general sales-tax rate?

Plain-English summary

An out-of-state company that sells a line of eleven edible products asked the Department a question that trips up a lot of food and snack sellers: are its products taxed at Tennessee's lower "food" rate or at the general sales-tax rate? The answer split the line: nine of the eleven products are "food and food ingredients" (the lower rate), and two are "candy" (the general rate).

Tennessee taxes most tangible goods at the general state rate, but it taxes "food and food ingredients" at a lower state rate. (At the time of this 2016 ruling those rates were 7% general and 5% for food; the legislature has changed Tennessee's food and general rates since, so check the current numbers — the durable lesson here is how products are classified, not the exact percentages.) On top of either rate, counties and cities add a local option tax of up to 2.75%.

"Food and food ingredients" covers substances sold for people to eat or drink for taste or nutrition — but it excludes alcoholic beverages, candy, dietary supplements, tobacco, and prepared food. Because the company's products are all consumed for taste or nutrition, each one counted as food unless it fell into one of those excluded boxes. The two that mattered here were candy and dietary supplements.

How "candy" is defined (and why most products escaped it). Tennessee defines candy as a preparation of sweeteners combined with chocolate, fruit, nuts, or other ingredients in the form of bars, drops, or pieces, that contains no flour and needs no refrigeration. The Department used three bright lines from that definition:

• Form: candy must be in bars, drops, or pieces. Products sold as liquids or powders are not candy — which knocked most of the company's products out of the candy box even when they contained sweeteners.
• Flour: a preparation containing flour is never candy. One product was a sweetened bar, but its ingredient list included "peanut flour," so it was food, not candy. (To count as "containing flour," the label has to list the word "flour" — and it doesn't have to be grain-based.)
• Sweeteners: candy must contain sweeteners. One product was sold in pieces but had no sugar or sweeteners, so it wasn't candy either.

There's also a "pieces" wrinkle: a "piece" means a portion with the same make-up as the whole product. A loose mixture of different items isn't "pieces," so a trail-mix-style blend isn't candy even if some pieces in it would be candy on their own.

How "dietary supplement" is decided. A product is an excluded (general-rate) dietary supplement only if its label carries a "Supplement Facts" box (the FDA format under 21 C.F.R. 101.36). None of these products had that heading, so none were dietary supplements.

The two that were candy. One product was a bar of sweeteners (fructose syrup and dextrose) coated in chocolate, with no flour and no refrigeration — textbook candy. The other was sugar combined with nuts in the form of pieces — also candy. Both are taxed at the general rate.

What this means for you

Grocers, convenience stores, and snack/nutrition-bar sellers

Whether you charge the lower food rate or the general rate depends on a product-by-product test, not on where the item sits on the shelf. Two similar-looking bars can be taxed differently: a sweet bar with flour in the ingredients is food (lower rate), while a sweet bar without flour, in bar/drop/piece form, is candy (general rate). When in doubt, read the ingredient label against the candy definition.

What pushes a product into the higher "candy" rate

A product is candy (general rate) only if it checks all the boxes: it's a preparation of sweeteners combined with other ingredients, it's in the form of bars, drops, or pieces, it has no flour, and it needs no refrigeration. Miss any one — it's a liquid or powder, it has no sweetener, or it lists flour — and it stays in the lower-rate "food" category.

Supplement and wellness brands

Your product is only taxed as a higher-rate dietary supplement if the label carries a "Supplement Facts" box. A "Nutrition Facts" label (or no supplement box) keeps it in the food category. The label format, not the marketing, controls.

Accountants and tax professionals

The exclusions in § 67-6-102(41) do the work: "candy" (§ 67-6-102(9)) and "dietary supplement" (§ 67-6-102(26)) are read against their statutory definitions, with undefined terms like "piece" taken from common usage (Beare Co.; Tenn. Farmers Assurance; Merriam-Webster's). Food is taxed under § 67-6-228(a); items excluded from food revert to the general rate under § 67-6-202(a) and § 67-6-228(b); local option up to 2.75% applies either way (§ 67-6-702(a)(1)). Confirm the current state food and general rates, which have changed since 2016.

Common questions

Q: Is a protein bar or snack bar taxed as food or candy in Tennessee?
A: It depends on the ingredients and form. A sweetened bar in bar/drop/piece form with no flour and no refrigeration is "candy" (general rate). If it contains flour (e.g., peanut flour), or is a liquid/powder, or has no sweetener, it's "food" (lower rate).

Q: My product has sugar and is sold in pieces. Is it automatically candy?
A: No. It also has to have no flour and need no refrigeration, and the "pieces" must each have the same make-up as the whole. An unsweetened piece, or a flour-containing one, isn't candy.

Q: How do I know if my product is a taxable "dietary supplement"?
A: Look at the label. It's a dietary supplement for Tennessee sales tax only if it carries a "Supplement Facts" box (per 21 C.F.R. 101.36). Without that heading, it isn't.

Q: What were the rates in this ruling, and do they still apply?
A: At the time (2016), food was taxed at a 5% state rate and other goods at 7%, each plus local option up to 2.75%. Tennessee has adjusted its food and general rates since, so verify the current rates — but the classification analysis is the durable part.

Q: Can I rely on this letter ruling?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts it was issued to, and it can be revoked or modified. Confirm your own products with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-6-102(41) (definition of "food and food ingredients"; excludes alcoholic beverages, candy, dietary supplements, tobacco, prepared food)
• § 67-6-102(9) (definition of "candy" — sweeteners + ingredients in bars/drops/pieces; no flour; no refrigeration)
• § 67-6-102(26), (26)(C) (definition of "dietary supplement"; "Supplement Facts" box per 21 C.F.R. 101.36)
• § 67-6-228(a) (reduced state rate for food and food ingredients — 5% at the time of the ruling); § 67-6-228(b) (excluded items taxed at the general property rates)
• § 67-6-202(a) (general state sales-tax rate — 7% at the time of the ruling)
• § 67-6-702(a)(1) (local option sales tax of up to 2.75%)
• § 67-6-102(76) ("retail sale"); § 67-6-102(78)(A) ("sale")

Federal:

• 21 C.F.R. 101.36 ("Supplement Facts" labeling that identifies a dietary supplement)

Case law and references:

• Beare Co. v. Tenn. Dep't of Revenue, 858 S.W.2d 906 (Tenn. 1993); Tenn. Farmers Assurance Co. v. Chumley, 197 S.W.3d 767 (Tenn. Ct. App. 2006) (undefined statutory terms take their common usage)
• Merriam-Webster's Collegiate Dictionary 938 (11th ed. 2003) (common meaning of "piece")

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/16-03.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 16-03
Letter rulings are binding on the Department only with respect to the individual taxpayer being
addressed in the ruling. This ruling is based on the particular facts and circumstances presented,
and is an interpretation of the law at a specific point in time. The law may have changed since this
ruling was issued, possibly rendering it obsolete. The presentation of this ruling in a redacted form
is provided solely for informational purposes, and is not intended as a statement of Departmental
policy. Taxpayers should consult with a tax professional before relying on any aspect of this ruling.
SUBJECT
The application of the Tennessee sales and use tax to the sale of various edible products.

SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of existing
facts furnished to the Department by the taxpayer. The rulings herein are binding upon the Department,
and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation or
modification shall be effective retroactively unless the following conditions are met, in which case the
revocation shall be prospective only:
(A)

The taxpayer must not have misstated or omitted material facts involved in the
transaction;

(B)

Facts that develop later must not be materially different from the facts upon which
the ruling was based;

(C)

The applicable law must not have been changed or amended;

(D)

The ruling must have been issued originally with respect to a prospective or proposed
transaction; and

(E)

The taxpayer directly involved must have acted in good faith in relying upon the
ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.

FACTS
[TAXPAYER] (the “Taxpayer”) is located in [STATE] and is a [REDACTED] company that sells products such as
[REDACTED].
Specifically, the Taxpayer sells the following products (the “Edible Products”):
•

[PRODUCT 1]

•
•
•
•
•
•
•
•
•
•

[PRODUCT 2]
[PRODUCT 3]
[PRODUCT 4]
[PRODUCT 5]
[PRODUCT 6]
[PRODUCT 7]
[PRODUCT 8]
[PRODUCT 9]
[PRODUCT 10]
[PRODUCT 11]

A full list of the ingredients for each of these items is attached as Appendix A. All of the Edible Products
that the Taxpayer sells are in liquid or solid form and are sold for human ingestion for taste or nutritional
value.
RULINGS
Are the Edible Products considered “food and food ingredients” for Tennessee sales and use tax purposes?
Ruling: All of the Edible Products, except for the [PRODUCT 8] and the [PRODUCT 11], are
considered “food and food ingredients” for Tennessee sales and use tax purposes and are subject
to the Tennessee sales and use tax at the state rate of 5%, plus the local option rate of up to 2.75%.
[PRODUCT 8] and the [PRODUCT 11] are not considered “food or food ingredients” and are
therefore subject to the Tennessee sales and use tax at the state rate of 7%, plus the applicable
local option rate of up to 2.75%.
ANALYSIS
Under the Retailers’ Sales Tax Act,1 the retail sale in Tennessee of tangible personal property and
specifically enumerated services is subject to the sales tax, unless an exemption applies. “Retail sale” is
defined as “any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.”2
TENN. CODE ANN. § 67-6-102(78)(A) (Supp. 2015) defines “sale” in pertinent part to mean “any transfer of title
or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any
means whatsoever of tangible personal property for a consideration.”
With certain exceptions, tangible personal property sold at retail in Tennessee is generally subject to the
sales and use tax at the state rate of 7% of the sales price.3 Additionally, counties and incorporated cities
are authorized to impose a local option sales tax on all items subject to the state sales tax, at a rate of up
to 2.75% of the sales price.4

1

Tennessee Retailers’ Sales Tax Act, ch. 3, §§ 1-18, 1947 Tenn. Pub. Acts Ch. 22, 22-54 (codified as amended at TENN. CODE ANN. §§ 676-101 to -907 (2013)).
2

TENN. CODE ANN. § 67-6-102(76) (Supp. 2015).

3

TENN. CODE ANN. § 67-6-202(a) (2013).

4

TENN. CODE ANN. § 67-6-702(a)(1) (2013); see generally Tennessee Department of Revenue, List of Local Option Tax Rates, available at
http://tn.gov/assets/entities/revenue/attachments/taxlist.pdf (last accessed February 11, 2016).

Items meeting the definition of “food and food ingredients” under TENN. CODE ANN. § 67-6-102(41) are
subject to the sales and use tax at the state rate of 5% of their sales price.5 The local option sales tax also
applies to sales of “food and food ingredients” at a rate of up to 2.75% of the sales price.6
“Food and food ingredients” is defined in pertinent part to mean “substances, whether in liquid,
concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans
and are consumed for their taste or nutritional value.”7 The term “food and food ingredients,” however,
does not include alcoholic beverages, candy, dietary supplements, tobacco, or prepared food.8 Such items,
therefore, are taxed at the rates applicable to sales of tangible personal property, i.e., a 7% state rate and a
local option rate of up to 2.75%.9
The Taxpayer represents that all of the Edible Products it sells are generally in liquid or solid form and sold
for human ingestion for taste or nutritional value. Consequently, an Edible Product will properly be
considered “food and food ingredients” unless it falls within one of the exceptions to the definition. For
purposes of this ruling, the relevant exceptions are candy and dietary supplements.10
“Candy” is “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 shall
not include any preparation containing flour and shall require no refrigeration.”11 The term “piece” is not
defined by the Tennessee Code or the Tennessee courts for Tennessee sales and use tax purposes.12
However, a “piece” is commonly understood to be a portion that has the same make-up as the product
taken as a whole.13 Different individual ingredients and loose mixtures of different items that make up an
entire product are not “pieces” as the term is used for purposes of the definition of “candy.” A product
comprised of such differing ingredients is therefore not candy for purposes of the Tennessee sales and
use tax, even if some of the ingredients would be considered candy on an individual basis.
To be considered as a “dietary supplement,” a product must, among other things, “be labeled as a dietary
supplement, identifiable by the supplement facts box found on the label and as required pursuant to 21
CFR 101.36,”14 which, in turn, requires that the declaration of nutrition information on the label contain the
heading “Supplement Facts.” Therefore, if the nutrition label of an Edible Product does not contain the
heading “Supplement Facts,” that item is not a dietary supplement for purposes of the Tennessee sales
and use tax.
5

TENN. CODE ANN. § 67-6-228(a) (2013).

6

See generally TENN. CODE ANN. § 67-6-702(a)(1).

7

TENN. CODE ANN. § 67-6-102(41).

8

Id.

9

TENN. CODE ANN. § 67-6-228(b).

10

See TENN. CODE ANN. § 67-6-102(41). Note that although alcoholic beverages, tobacco, and prepared food are excluded from the
definition of food and food ingredients, those items are not relevant to this ruling and are not further discussed.

11

TENN. CODE ANN. § 67-6-102(9). In order for a product to be treated as containing flour, the product label must specifically list the
word “flour” as one of the ingredients. There is no requirement that the flour be grain-based.
12

The Tennessee Supreme Court has stated that when a statute does not define a term, it is proper to look to common usage to
determine the term’s meaning. See, e.g., Beare Co. v. Tenn. Dep’t of Revenue, 858 S.W.2d 906, 908 (Tenn. 1993); see also Tenn. Farmers
Assurance Co. v. Chumley, 197 S.W.3d 767, 782-83 (Tenn. Ct. App. 2006).
13

For example, a “piece” is commonly understood to be “an object . . . regarded as a unit of a kind or class.” MERRIAM-WEBSTER’S
COLLEGIATE DICTIONARY 938 (11th ed. 2003).
14

TENN. CODE ANN. § 67-6-102(26)(C).

Food and Food Ingredients
[TYPE A PRODUCTS]
[PRODUCT 1], [PRODUCT 2], [PRODUCT 3], and [PRODUCT 4] (the “[TYPE A PRODUCTS]”) are considered
“food and food ingredients” for sales and use tax purposes.
The [TYPE A PRODUCTS] are not excluded from the definition of “food and food ingredients.” Specifically,
the labels of the [TYPE A PRODUCTS] do not contain the heading “Supplement Facts,” a necessary part of
the definition of “dietary supplement.” Therefore, the [TYPE A PRODUCTS] are not “dietary supplements.”
Additionally, although several of the [TYPE A PRODUCTS] contain sugar or an artificial sweetener
(sucralose), none of the [TYPE A PRODUCTS] fall within the exception for “candy” from the definition of
“food and food ingredients” because the definition of “candy” requires that it be in the form of “bars,
drops, or pieces.” The [TYPE A PRODUCTS] are sold in liquid or powder form and, therefore, cannot be
classified as “candy.”
Accordingly, the [TYPE A PRODUCTS] are properly characterized as “food and food ingredients” and are
subject to the Tennessee sales and use tax at the state rate of 5% and the local option rate of up to 2.75%.
TYPE B PRODUCTS
[PRODUCT 5] and [PRODUCT 6] (the “[TYPE B PRODUCTS]”) are characterized as “food and food
ingredients” for sales and use tax purposes.
The [TYPE B PRODUCTS] are not excluded from the definition of “food and food ingredients.” The [TYPE B
PRODUCTS] do not come within the exception for “dietary supplements” from the definition of “food and
food ingredients” because they do not contain a “Supplemental Facts” box on their labels. Additionally,
although the [PRODUCT 5] contains an artificial sweetener (sucralose), neither of the [TYPE B PRODUCTS]
fall within the “candy” exception from the definition of “food and food ingredients” because the definition
of “candy” requires that the item be in the form of “bars, drops, or pieces.” [TYPE B PRODUCTS] are sold in
powder form.
Accordingly, the [TYPE B PRODUCTS] are properly characterized as “food and food ingredients” and are
subject to the Tennessee sales and use tax at the state rate of 5% and the local option rate of up to 2.75%.
PRODUCT 7
[PRODUCT 7] is characterized as “food and food ingredients” for sales and use tax purposes.
[PRODUCT 7] is not excluded from the definition of “food and food ingredients.” Specifically, [PRODUCT
7’S] label does not contain the heading “Supplement Facts,” a necessary part of the definition of “dietary
supplement.” Therefore, it is not a “dietary supplement.”
Although [PRODUCT 7] is a preparation of sugar and other ingredients in the form of a bar, its list of
ingredients contains “peanut flour.” Because the definition of “candy” excludes items that contain flour,
[PRODUCT 7] is not properly characterized as “candy.”

Accordingly, [PRODUCT 7] is properly characterized as “food and food ingredients.” Consequently,
[PRODUCT 7] is subject to the Tennessee sales and use tax at the state rate of 5% and the local option rate
of up to 2.75%.
[PRODUCT 9]
[PRODUCT 9] is considered “food and food ingredients” for sales and use tax purposes.
[PRODUCT 9] does not come within the exception for “dietary supplements” from the definition of “food
and food ingredients” because it does not contain a “Supplemental Facts” box on its label. Furthermore,
[PRODUCT 9] is not considered “candy” for sales and use tax purposes. Although [PRODUCT 9] contains an
artificial sweetener (sucralose), it is not sold in the form of “bars, drops, or pieces,” which is a requirement
to be considered “candy.”
Accordingly, [PRODUCT 9] is properly characterized as “food and food ingredients” and is subject to the
Tennessee sales and use tax at the state rate of 5% and the local option rate of up to 2.75%.
[PRODUCT 10]
[PRODUCT 10] is characterized as “food and food ingredients” for purposes of the Tennessee sales and use
tax.
Although [PRODUCT 10] is sold in pieces, they do not meet the definition of “candy” because they do not
contain “sugar, honey, or other natural or artificial sweeteners.” Additionally, the [PRODUCT 10’S] label
does not contain the heading “Supplement Facts,” a necessary part of the definition of “dietary
supplement” for sales and use tax purposes.
Therefore, [PRODUCT 10] is properly characterized as “food and food ingredients” and is subject to the
Tennessee sales and use tax at the state rate of 5% and the local option rate of up to 2.75%.

Candy
[PRODUCT 8]
[PRODUCT 8] is characterized as “candy” for sales and use tax purposes.
[PRODUCT 8] is a preparation of natural or artificial sweeteners (fructose syrup and dextrose) in
combination with chocolate (chocolate coating) in the form of a bar. Additionally, [PRODUCT 8] does not
contain flour and requires no refrigeration.
Consequently, [PRODUCT 8] meets the definition of “candy” under TENN. CODE ANN. § 67-6-102(9) and
therefore is excluded from the definition of “food and food ingredients.”15 As a result, the [PRODUCT 8] is
subject to the Tennessee sales and use tax at state rate of 7% and the local option rate of up to 2.75%.
[PRODUCT 11]

15

Note that because [PRODUCT 8] meets the definition of “candy,” it is not necessary to address whether it might also meet the
definition of “dietary supplement” under TENN. CODE ANN. § 67-6-102(26).

[PRODUCT 11] is considered “candy” for sales and use tax purposes.
[PRODUCT 11] is a preparation of sugar in combination with nuts in the form of pieces. Therefore
[PRODUCT 11] meets the definition of “candy,” and therefore does not come within the definition of “food
and food ingredients.”16
Because [PRODUCT 11] is characterized as “candy” under TENN. CODE ANN. § 67-6-102(9), it is subject to the
Tennessee sales and use tax at the state rate of 7% and the local option rate of up to 2.75%.

Gary D. Williams
Assistant General Counsel

16

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

April 3, 2016

Note that because [PRODUCT 11] meets the definition of “candy,” it is not necessary to address whether they also meet the
definition of “dietary supplement” under TENN. CODE ANN. § 67-6-102(26).

LETTER RULING 16-03
APPENDIX A

[REDACTED]

ITEMS SOLD AT RETAIL