You won’t find too many more confusing sales tax scenarios than the one involving dietary supplements.
For purposes of sales tax, sometimes supplements and vitamins are considered drugs (prescription or not), sometimes groceries or food, sometimes tangible personal property – and sometimes not. In still other instances, they’re not taxed at all. So how do you manage your sales tax liability if you are selling vitamins, dietary supplements or other items that fall into this undescriptive category?
What’s in a name?
The label on these products can have “Nutrition Facts” or “Supplement Facts.” Some states determine taxability and tax-exempt status of the products based on the labels. Labels can also have “drug facts” that would likely trigger tax as a prescription or nonprescription drug (this could exempt the vitamins and supplements from state sales tax in some states like Alabama, Connecticut and Kansas and, in some cases, Oklahoma).
The ingredient list can also create sales tax obligations; the ingredients in some protein bars render them taxable as “candy” in some states. On the flip side, obvious candy coating on a nutrition bar doesn’t matter and the product is still considered a tax-exempt dietary supplement in Florida.
Sometimes the label doesn’t matter at all. In Arkansas, Arizona, Georgia and other states, these products are simply not considered “food” and are generally taxable. In some states, supplements don’t qualify as “food” because they don’t meet the guidelines of food stamp programs.
Here’s a rundown of what some other states do (this changes frequently – check with an individual state if you have questions and want the latest regulations).
Most states have no special rules for supplements and vitamins. The products are tax-exempt (more or less) in the District of Columbia, Florida, Maryland, Michigan, New Jersey, New York, Texas, Vermont, West Virginia and Wyoming.
Special, more detailed conditions for sales tax on these products apply in California, Illinois, Massachusetts and Utah.
Your best bet by far is, once again, to check with states where you have nexus to determine if there is tax on vitamins and supplements.
Sales tax isn’t getting any easier. Let TaxConnex manage the burden of keeping up with all the changes and challenges that come with staying compliant. Contact us to learn what it means when sales tax compliance is all on us.