Are flash-dried fruit and vegetable juice capsules exempt from Texas sales tax as food products?

Plain-English summary

The Comptroller's office examined a product made of flash-dried fruit and vegetable juices, sold in capsule form, following a meeting with the taxpayer. The letter's author explained that the statute was reviewed and the product should be considered a food product because it is represented as a food and contains only dried fruit and vegetable juices and nothing more.

The Comptroller's office also had its tax specialists review the product further. The letter acknowledges it was "a close question" under the office's rule, but notes that on November 18, 1994, the Comptroller had already advised another seller of a similar product that such capsules are exempt as food products because they are pure fruit and pure vegetable products. Based on the information presented, the letter confirms that this taxpayer's product is likewise not subject to sales tax.

What this means for you

Sellers of dried fruit/vegetable juice capsule products

If your product is flash-dried fruit and vegetable juice sold in capsule form, and it is represented as a food and contains nothing but the dried fruit and vegetable juices themselves, this letter indicates the Comptroller has treated that kind of product as an exempt food product rather than a taxable item.

Accountants and tax professionals advising on food-product exemptions

This letter shows the Comptroller treating purity of ingredients (only dried fruit and vegetable juices, "nothing more") and how the product is represented (as a food) as the key facts supporting food-exemption treatment, even for a product in capsule form and even though the office described the question as "close."

Common questions

Q: Why were fruit and vegetable juice capsules treated as exempt food products instead of taxable items?
A: The letter states the product should be considered a food product because it is represented as a food and contains only dried fruit and vegetable juices and nothing more.

Q: Was this the first time the Comptroller had addressed this kind of product?
A: No. The letter references an earlier determination, on November 18, 1994, in which the Comptroller advised another seller of a similar product that its capsules were exempt as food products because they were pure fruit and pure vegetable products.

Q: Did the Comptroller consider this an easy call?
A: No. The letter describes it as "a close question in light of our rule," though the office ultimately confirmed the product is not subject to sales tax based on the information presented.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9503038L

Original ruling text

March 16, 1995

Dear **:

Glen and I enjoyed meeting with you and hearing about **. I examined the
statute and concluded it should be considered a food product because it is
represented as a food and contains only dried fruit and vegetable juices and
nothing more.

However, I also asked our tax specialists to review the product. While it is a
close question in light of our rule, it turned out that on November 18, 1994,
we advised another seller of * that the capsules are exempt as food
products because they are pure fruit and pure vegetable products. I am happy
to confirm to you that based on the information presented to us that the
product is not subject to sales tax.

Should you have any further questions, please call me at 1-800-531-544l,
extension 3-4004.

Sincerely,

Wade Anderson
Assistant Director Tax Administration