A new California law clarifies that infant formula is exempt from sales tax—and eliminates compliance confusion for retailers who sell it.
Most California restaurant owners and small retailers don't realize they may have been operating in a gray zone when it comes to selling infant formula. SB1151 changes that by explicitly exempting infant formula from California sales and use tax—a move that eliminates audit risk and clarifies a compliance obligation that was never entirely clear in the first place.
The bill amends California Revenue and Taxation Code Section 6359, subdivision (b)(4), to codify infant formula as a "food product" under the state's existing sales-tax exemption. In plain terms: infant formula is now explicitly listed as a product that does not trigger sales or use tax collection obligations.
This matters because food products have long been exempt from California sales tax—but infant formula occupied an ambiguous space. Retailers, pharmacies, and baby-supply shops couldn't always be certain whether a particular formula product qualified for the exemption or whether they needed to collect tax on the sale. That uncertainty created compliance risk: every transaction was potentially subject to audit challenge, and there was no clear answer in the law itself.
SB1151 removes that ambiguity. By explicitly naming infant formula as a food product exempt from tax, the law gives retailers—including those in restaurants with grab-and-go or retail sections—a clear, codified basis to not collect sales tax on these sales.
The exemption applies to any California retailer selling infant formula, including:
If your business sells infant formula in any form, this law applies to you.
SB1151 takes effect immediately upon enactment as a tax levy. There is no delayed implementation period. The operative amendment is found in Section 1 of the bill, on page 2 of the bill text, which modifies Revenue and Taxation Code § 6359(b)(4).
If your business sells infant formula, audit your point-of-sale system and tax settings to ensure you are not collecting sales tax on these transactions. If you have been collecting tax on infant formula sales in the past, consult with a tax professional about whether adjustment or amended filings may be appropriate.
The exemption is straightforward and retroactive in effect, but compliance requires action on your end. Make sure your accounting and POS systems reflect the change, and keep records of what you sell as infant formula in case of future audit.
For detailed guidance specific to your business type and sales volume, the California Department of Tax and Fee Administration and your local trade association can provide additional resources.