Tax Type
Retail Sales and Use Tax
Description
Exemption of controlled drugs purchased for use in the Taxpayer's professional practice.
Topic
Constitutional Provisions
Exemptions
Medicine and Drugs
Date Issued
08-24-2009
August 24, 2009
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued by the Department for the period January 2006 through December 2008.
FACTS
The Taxpayer operates as a medical practice offering medical services to its patients. The Taxpayer was audited and assessed tax on bulk purchases of the contraceptive products Mirena and Implanon. Mirena is an intrauterine device (IUD) that slowly releases a chemical agent levonorgestrel into the body that causes contraceptive effects. Implanon is a subdermal implant device that releases the medication etonogestela into the body for the same purpose.
The auditor assessed the tax based on Public Document (P.D.) 06-135 (10/30/06). The Taxpayer contests the assessment of the tax to these purchases on the basis that they are classified as prescription drugs by the United States Food and Drug Administration (FDA) and Schedule VI controlled drugs under the Virginia Drug Control Act. Based on these authorities, the Taxpayer claims that Mirena and Implanon are exempt of the tax in accordance with Va. Code § 58.1-609.10 9. The Taxpayer cites a number of other authorities to support its position.
DETERMINATION
Virginia Code § 58.1-609.10 9 provides an exemption from the retail sales and use tax for "[m]edicines [and] drugs . . . dispensed by or sold on prescriptions or work orders of . . , licensed physicians . . . [and] controlled drugs purchased for use by a licensed physician, optometrist, licensed nurse practitioner, or licensed physician assistant in his professional practice . . . ."
Based on FDA guidelines reviewed by the Department, the Mirena and Implanon devices are classified by the FDA as prescription drugs. The Virginia Board of Pharmacy concurs with the federal classification and deems Mirena and Implanon as Schedule VI controlled substances under the Virginia Drug Control Act. For this reason, P.D. 06-135 is not applicable to the Taxpayer because the IUDs in that ruling did not release a medicine or drug and were classified by the FDA, as medical devices. Based on the above information and the requirements set forth in the statute, Mirena and Implanon qualify for exemption under Va. Code § 58.1-609.10 9 as controlled drugs purchased for use in the Taxpayer's professional practice.
CONCLUSION
Based on the foregoing, the audit will be adjusted to remove the tax assessed on the purchases of Mirena and Implanon. Accordingly, Bill #***** which consists only of the Mirena and Implanon assessment, will be abated in full.
The Code of Virginia section and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-3628511257.T
Rulings of the Tax Commissioner