Tax Type
Retail Sales and Use Tax
Description
Medicines; Pharmaceutical supplies and samples
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
09-21-1989
September 21, 1989
Re: Ruling Request/Sales and Use Tax
Dear**************
This is in reply to your letter of April 25, 1989 requesting a ruling on pharmaceutical supplies sold to Virginia customer by an out of state supplier.
FACTS
Your client (the "Company") which manufactures and distributes pharmaceutical products, primarily prescription drugs, to customers located in the state of Virginia. These products are sold to private distributors, wholesalers, pharmacies, drug stores, hospitals, nursing homes, clinics and physicians. ********seeks a ruling as to which types of transactions would be taxable sales, and which would be exempt sales for resale.
DETERMINATION
§58.1-608(7)(a) of the Code of provides an exemption from the sales and use tax for the following products:
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- "Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescription or work order of licensed physicians, dentists, optometrists, ophthalmologist, opticians, audiologist, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice."
- "Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescription or work order of licensed physicians, dentists, optometrists, ophthalmologist, opticians, audiologist, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice."
Sales to doctors or physicians: All sales to doctors and physicians of items purchased in bulk quantity for dispensing to their patients would be subject to the tax. The one exception to this would be "controlled drugs" sold to a licensed physician as outlined in §58.1-608(7)(a) of the Code. "Controlled drugs" are those substances listed in Schedules I through IV, Chapter 34, of Title 54.1 of the Code of Virginia (copy enclosed).
Sales to Veterans Administration Hospital: These hospitals are instrumentalities of the Federal Government and would enjoy the governmental exemption provided in Virginia Code §58.1-608(1)(e).
Sales to profit and nonprofit hospitals: Virginia Code §58.1-608(7)(d) exempts from the tax "tangible personal property for use or consumption by a nonprofit hospital." Sales to for-profit hospitals are taxable. See regulation §630-10-47, copy enclosed.
Sales to Nursing Homes: Sales to nonprofit licensed nursing homes are exempt as enumerated in Virginia Code §58.1-608(7)(d). Nursing homes which are conducted for profit would be subject to the tax on all tangible personal property purchased for use and consumption in connection with its operations.
Sales to Clinics: As noted in Regulation §630-10-47 sales to nonprofit and for-profit clinics are generally subject to the tax. However, Virginia Code §58.1-608(7)(k) exempts from the tax "tangible personal property for use or consumption by a nonprofit nonstock corporation, which is exempt from taxation under §501(c)(3) of the Internal Revenue Code, and which is organized under the laws of the Commonwealth exclusively for the purpose of conducting a clinic furnishing free health care services by licensed physicians or dentists."
Samples: The Company will be subject to the use tax on any prescription or nonprescription samples distributed by the Company's sales representatives to Virginia hospitals, nursing homes, physicians, etc. The tax will also apply to samples for distribution outside Virginia if they are removed from a resale inventory within Virginia (see Commonwealth v. Miller Morton Co., 220 Va. 852, 263 S.E.2d 413 (1980). The use tax would apply to the Company's total cost price as defined in Virginia Code §58.1-602, i.e., the actual cost of an item or article of tangible personal property ... without any deduction therefrom on account of the cost of materials used, labor, or service costs, transportation charges, or any expense whatsoever.
I have enclosed a dealers application for registration and instruction for the Company's use in applying for the sales and use tax registration.
If you should have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner