Tax Type
Retail Sales and Use Tax
Description
Benefits from enrolling in the prescription savings club are deemed intangible
Topic
Collection of Tax
Tangible Personal Property
Date Issued
10-23-2009
October 23, 2009
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you request a ruling on the application of the retail sales and use tax to the sale of the Taxpayer's prescription savings club cards.
FACTS
The Taxpayer is a retail drug store and offers a prescription savings club to customers. The customers purchase a program card for a fee and also pay an annual fee for continued enrollment in the program. The members use the cards when making purchases at the Taxpayer's retail locations. The program entitles members to discounts on cash prices for select prescription drugs. Program members can also receive a 10% rebate or a credit on any purchase when private label items (store branded items) are purchased. The Taxpayer requests a ruling on whether the retail sales and use tax applies to the initial purchase of the card and to the annual fee.
RULING
Virginia Code § 58.1-603 imposes a tax "upon every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this Commonwealth any item or article of tangible personal property as defined in this chapter, or who leases or rents such property within this Commonwealth . . . ."
Virginia Code § 58.1-602 defines sale as "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration . . . ."
In this instance, membership in the prescription savings club does not entitle the members to receive tangible personal property. Based on the information provided, the benefits from enrolling in the program are deemed intangible. Accordingly, the Taxpayer would not be required to charge, collect or remit the retail sales and use tax on the initial purchase of the prescription savings card or on the annual fee charged to remain enrolled in the program.
This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, 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/1-3551112387P
Rulings of the Tax Commissioner