Are meal-replacement and nutritional supplement products like Extreme Measures and Preferred Whey taxable or exempt under Texas sales tax?

Plain-English summary

This letter from the Texas Comptroller's Tax Administration Division restates and corrects an earlier response (originally sent January 5, 1995) about the sales tax treatment of two products sold by the requester's company: Extreme Measures and Preferred Whey. The letter specifically notes it is being reissued "to include a correction in the taxability of Preferred Whey."

The Comptroller lays out the general rule for these kinds of products: products that are substituted for a meal an individual would normally eat (the letter cites Slim Fast and Ultra Slim Fast as examples) are treated as food products, and sales of these meal-replacement products are exempt from tax. On the other hand, substances that have substantial nutritional value but are marketed, labeled, and promoted to the public as being therapeutic are taxable, because they don't qualify as food products.

Applying that rule to the labels submitted by the requester:

• Extreme Measures may be used as a meal replacement, so it is treated as a food product and is exempt from tax.
• Whey is classified as a food product; therefore, Preferred Whey is exempt from tax.

The letter notes this opinion is based on the facts presented, and could change if there are additional or different facts.

What this means for you

Sellers of meal-replacement and nutritional products

Whether your product is taxable in Texas can turn on how it's marketed and labeled, not just its ingredients. A product marketed and labeled as a substitute for a normal meal is treated as an exempt food product. A product with substantial nutritional value that is instead marketed, labeled, and promoted as therapeutic is taxable because it isn't treated as a food product.

Sellers of whey-based products

This letter confirms that whey itself is classified as a food product by the Comptroller, which supported the exempt treatment of Preferred Whey here. If you sell whey-based products, this letter's reasoning may be relevant, but remember it is based on the specific labels submitted by this taxpayer and the facts presented.

Accountants and tax professionals advising food/supplement clients

Note that this ruling is itself a correction of an earlier letter from the same office — the taxability of Preferred Whey changed between the original January 5, 1995 letter and this May 31, 1995 restatement. This is a reminder that letter rulings can be revised, and that clients should confirm they are relying on the most current guidance for their specific product and labeling.

Common questions

Q: Is a meal-replacement product like Extreme Measures taxable in Texas?
A: No. The Comptroller treated Extreme Measures as exempt because, based on its label, it may be used as a meal replacement, and products substituted for a normal meal are treated as exempt food products.

Q: Is Preferred Whey taxable?
A: No. The Comptroller classified whey as a food product, so Preferred Whey is exempt from tax. This letter corrects an earlier response that had reached a different conclusion on this specific point.

Q: What makes a nutritional product taxable instead of exempt?
A: Under this letter, a substance with substantial nutritional value is taxable if it is marketed, labeled, and promoted to the public as being therapeutic, because in that case it doesn't qualify as a food product.

Q: Does this ruling apply to any whey product, or just Preferred Whey?
A: The letter states whey generally is classified as a food product, but the specific exempt determination was based on the labels submitted for Preferred Whey and Extreme Measures. The Comptroller notes the opinion is based on the facts presented and could change with different facts.

Citations and references

No statutes, regulations, or cases 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/9505L1351F09

Original ruling text

May 31, 1995

Dear **:

On January 5,1995, I sent a letter to you regarding the taxability of
Extreme Measures and Preferred Whey. I am restating my earlier response
(below) to include a correction in the taxability of Preferred Whey.

I have received your letter regarding the taxability of to new food
products sold by your company.

Products (such as Slim Fast and Ultra Slim Fast) that are substituted
for a meal that an individual would normally eat are treated as food
products. Sales of these meal replacement products are exempt from
tax. Otherwise, substances that have substantial nutritional value
but are marketed, labeled, and promoted to the public as being
therapeutic are taxable because they don't qualify as food products.
I have reviewed the labels you submitted for Extreme Measures and
Preferred Whey. Based on the information provided on the labels,
Extreme Measures may be used as a meal replacement and therefore
is treated as a food product and exempt from tax. Whey is
classified as a food product; therefore, Preferred Whey is exempt
from tax.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion could change.

You may call me toll free at 1-800-531-5441, Ext. 34663. My direct
line is 512/463-4663. You may also write to Tax Administration
Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale
Tax Administration Division

NOTE: Previous Accession Number 9505184L