Your letter asks whether purchases of herbal extracts, products which are dispensed in tablet, capsule, powder, softgel, gelcap or liquid form, are exempt from sales and use taxes as "food for human consumption". MCL 205.54g, MCL 205.94d.

In both sales and use tax statutes, "food for human consumption" is defined to include "all food and drink items". MCL 205.54g (3); MCL 205.94d(3). Historically, the department interpreted the term "food … items" to include vitamins but exclude herbal supplements. The Department Rule 86 adopted in 1976 reflected this interpretation. 1979 AC R. 205.136. This rule also noted that dietary supplements were exempt food items. Dietary supplements were commonly understood at that time to refer to weight loss and multivitamin drinks such as Slimfast, Ensure, and Metrocal.

You note that herbal extracts are products that are not dissimilar to vitamins and both now belong to a larger category known as dietary supplements. In 1994, Congress enacted a definition of "dietary supplement" as part of the Food, Drug, and Cosmetic Act of 1938. The category of dietary supplements includes products containing vitamins, minerals, herbs, botanicals, amino acids, metabolites that generally are not considered "conventional food" but are used to supplement a diet. The Department is aware that some tax and regulatory authorities consider dietary supplements as "food" or "food ingredients" and that dietary supplements increasingly are dispensed in the form of "conventional foods". For example, the Food and Drug Administration regulates herbal supplements and vitamins uniformly as "dietary supplements" classified as food components. See 21 C.F.R.§101.36.

Most recently, the Streamlined Sales Tax Project, a multistate effort to provide uniform sales and use tax definitions involving Michigan and thirty-four other states, proposed a definition of "food and food ingredients" that includes "dietary supplements". Dietary supplements include both vitamins and herbal extracts. The definition has the sanction of thirty-five states and the added benefit of easing the burden of sales and use tax compliance and administration.

For these reasons, the Department has determined that it will include the broader definition of "dietary supplements" within Michigan's exemption of "food for human consumption". Accordingly, products containing herbal extracts, vitamins, and similar components are classified as food items. The Department will apply the new interpretation immediately to all cases on direct review on or after the date of this letter ruling, provided those cases are within the Department's statutory jurisdiction. MCL 205. 27a.

December 28, 2000              June Summers Haas
LR 00-01                             Commissioner of Revenue