Colorado Relies on Product Label to Determine if Item is Exempt Food

Thursday, February 23rd, 2012

 
 
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Colorado
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The Colorado Department of Revenue (DOR) recently released a private letter ruling clarifying the taxability of food and nutritional products. Colo. Priv. Ltr. Rul. No. PLR-11-008 (Dept. of Revenue Dec. 20, 2011). In the ruling, the DOR focused on whether the products bore "Nutrition Facts" or "Supplement Facts" labels, as the product's labeling is one of the keys to determining whether a product qualifies for Colorado's food exemption. The products at issue in the ruling carried "Nutrition Facts" labels, so they were ultimately determined to be exempt "food." At issue in the ruling were four types of nutrition drinks: (1) a complete nutrition shake marketed as a meal substitute; (2) a shake marketed as providing focused nutritional benefits; (3) a line of shakes for people with diabetes; and (4) a drink available in both powder and liquid forms marketed towards athletes. All four products were labeled with a "Nutrition Facts" panel, and none bore a "Supplement Facts" label. Colorado generally exempts food sold for domestic consumption. In the ruling, the DOR explained that Colorado defines "food" by using the same definition as the U.S. Department of Agriculture's Supplemental Nutrition Assistance (SNAP) Program and Women, Infant, and Children (WIC) program. In turn, those programs look to the food label required by the U.S. Food and Drug Administration to determine what products are "food." Thus, food and nutritional products that carry a "Nutrition Facts" label qualify as "food" for purposes of Colorado's food exemption. But, food-like items that bear a "Supplement Facts" label are dietary supplements; they are excluded from the definition of food and, therefore, are taxable. Because the products discussed in the ruling had "Nutrition Facts" labels and not "Supplement Facts" labels, the products are treated as food and qualified for Colorado's food exemption.

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