Tax Type
Retail Sales and Use Tax
Description
Cosmetics are not medicine even though they may have medicinal properties.
Topic
Exemptions
Medicine and Drugs
Date Issued
01-20-2011
January 20, 2011
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling on behalf of your client, ***** (the "Taxpayer"), regarding the application of the retail sales and use tax to various antibacterial products sold by the Taxpayer's affiliates.
FACTS
The Taxpayer's affiliate companies sell, among other products, a line of antibacterial gels, soaps, and sanitizers, including the following: antibacterial hand soaps, antibacterial hand gels, antibacterial hand sprays, antibacterial hand lotions, antibacterial hand wipes, hand gel sanitizers, conditioning hand sanitizers, hand sanitizers, and antibacterial hand foams. Each of the product's drug facts label lists an active ingredient of either alcohol, between 68%-72%, or triclosan 0.3%. The label identifies the product's purpose as "antiseptic;" and describes its use as "to decrease bacteria" on hands or skin. The product labels from the different categories indicate that the products leave hands "feeling clean and virtually germ-free; "clean, soft and virtually germ-free; "clean, lightly scented and virtually germ-free." Many of the products also advertise their skin nourishing and softening effects.
The Taxpayer notes that alcohol and triclosan are considered over-the-counter drugs by the United States Food and Drug Administration (FDA). Further, Public Documents (P.D.) 99-32 (3/18/99) and 05-135 (8/10/05) provide that the Department considers the FDA guidelines in the classification of products for purposes of exemption. The Taxpayer also indicates that Virginia Tax Bulletin (VTB) 98-4 (5/15/98) specifically recognizes that rubbing alcohol and antiseptics qualify for the exemption and the antibacterial products at issue contain either alcohol or antiseptics. Based on these authorities, the Taxpayer believes products at issue are exempt pursuant to Va. Code § 58.1-609.10 14 and seeks confirmation of this from the Department.
RULING
Virginia Code § 58.1-609.10 14 provides an exemption from the retail sales and use tax for nonprescription drugs and proprietary medicines. The tax bulletin defines nonprescription drugs as any substances or mixtures of substances containing medicines or drugs for which no prescription is required and which are generally sold for internal or topical use in the cure, mitigation, treatment, or prevention of disease in human beings. The tax bulletin further states that the exemption in Va. Code § 58.1-609.10 14 does not apply to cosmetics, toilet articles, devices, food products and supplements, or vitamins and mineral concentrates sold as dietary supplements (except when sold pursuant to a written prescription by a licensed physician). The tax bulletin provides that:
- ● Cosmetics are articles applied to the body for cleansing, beautifying, promoting attractiveness or altering the appearance (includes makeup, body lotions, cold creams, and hair restoration products);
● Toilet articles are those products advertised or held out for sale for grooming purposes (includes soaps, toothpastes, hair sprays, shaving products, colognes, deodorants, and mouthwashes)
Based on the above, only those nonprescription drugs and proprietary medicines purchased for the cure, mitigation, treatment or prevention of disease in human beings qualify for the nonprescription drugs exemption. Cosmetics and toiletry items, except those that contain medicinal ingredients and that are principally used for medical purposes, are taxable. A product that is a cosmetic is not a medicine even though it may have medicinal properties.
The Department's Nonprescription Drug Exemption Question and Answer Summary provides guidance in determining whether a product qualifies for, the nonprescription drug exemption. Questions 1-4 through 1-13 specifically address cosmetics and antibacterial products. The example in Question 1-5 explains that a cosmetic containing an acne treatment does not qualify for the exemption because the medication serves as a secondary function to the intended use of the product. This is in contrast to an acne treatment product that is intended solely for topical use in treating and/or preventing acne that would qualify for the exemption. Thus, the Department looks at the primary purpose of a product to determine if the product is principally used for cosmetic or grooming purposes or used in the cure, mitigation, treatment, or prevention of a disease in human beings.P. D.11-7
Based upon the Taxpayer's product labeling, if the relevant antiseptic ingredient, either alcohol or triclosan, were removed from each of the Taxpayer's antibacterial products, they would be classified as cosmetics or toiletry articles and thus not within the exemption in Va. Code § 58.1-609.10 14. These products are expressly designed to cleanse, beautify or promote attractiveness of the purchaser, or they are used for grooming purposes. Any nonprescription drugs added to help prevent bacteria serves as a secondary function to the intended use of the product. Thus, the antibacterial products listed by the Taxpayer are deemed cosmetics or toiletry articles and are subject to the sales tax. The Taxpayer is responsible for collecting and remitting the sales tax on the sale of such products.
This ruling is consistent with the prior ruling of the Tax Commissioner in P.D. 99-32. In that case, the taxpayer requested guidance in determining if the sale of certain products qualified for the nonprescription drugs and proprietary medicines exemption. Among the items listed was toothpaste that contained a nonprescription drug. The Tax Commissioner ruled that toothpaste is generally sold for grooming purposes and that nonprescription drugs added to help prevent gingivitis serve as a secondary function to the intended use of the product. Accordingly, toothpaste containing a nonprescription drug or ingredients to help prevent gingivitis is taxable. The same reasoning applies here.
CONCLUSION
I hope the foregoing has responded to your inquiry. 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 section, public documents and tax bulletin cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. The Nonprescription Drug Exemption Question and Answer Summary is available on line at www.townhall.virginia.gov in the Guidance Documents section of the Virginia Regulatory Town Hall web site. If you have any questions about this ruling, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-4577917394.T
Rulings of the Tax Commissioner