Tax Type
Retail Sales and Use Tax
Description
Medical, Dental, and Optical Supplies and Drugs; Vision Care Products
Topic
Taxability of Persons and Transactions
Date Issued
08-04-1992
August 4, 1992
Dear***************
This will reply to your letter of May 7, 1992 in which you seek a ruling on the applicability of the retail sales and use tax to various products sold by********* (the "Taxpayer").
FACTS
The Taxpayer sells a full range of prescription and nonprescription pharmaceuticals and vision care products which include:
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- prescription drugs which federal law prohibits dispensing without a prescription;
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- nonprescription or "over-the-counter" drugs; and
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- vision care products such as contact lens cleaning solutions, saline solutions, and rewetting and lubricating solutions.
You seek a ruling on the applicability of the tax to sales of the above items to vision care specialists.
RULING
Prescription Drugs: Va. Code §58.1-608(A)(7)(a) provides an exemption from the retail sales and use tax for:
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- [m]edicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescriptions or work orders of licensed physicians, dentists, optometrists, ophthalmologists, opticians...; and controlled drugs purchased for use by a licensed physician in his professional practice.
Accordingly, sales of prescription drugs by the Taxpayer to a dealer for filling prescriptions are not subject to the tax and must be purchased under a resale certificate of exemption. However, since sales of controlled drugs to a licensed physician for use in his professional practice are specifically exempt from the tax, no certificate of exemption is required when making sales to such individuals
While the terms "dispensed" and "prescribed" are not defined in our law or regulations, the department has traditionally held that in order to qualify as an exempt medicine or drug, a drug must be on written prescription or work order of physicians.
Nonprescription Drugs and Vision Care Products: Currently, purchases of nonprescription drugs, vision care products, eyeglass frames and other optical merchandise by dealers, including ophthalmologists and optometrists, for resale are not subject to the tax until sold at retail. Sales of ophthalmic instruments and supplies to physicians, ophthalmologists and others for their own use are taxable. Thus, vision care specialists may purchase optical supplies and vision care products for resale exempt of the tax and are required to collect the tax at the time of sale. , they must pay the tax on any supplies purchased for their own use.
Virginia Regulation (VR) 630-10-32, copy enclosed, provides that unless it is known at the time of purchase that an item is for use or consumption by the dealer, all inventory items intended to be resold or used in an exempt manner may be purchased under certificates of exemption. It provides further that any person who withdraws an item of tangible personal property for his/her own use from an inventory of property on which no tax has been paid must report tax on the cost price of all property withdrawn for purposes other than sale. This includes items for personal use, gift or donation.
Effective July 1, 1994, nonprescription drugs and proprietary medicines used in the cure, mitigation, treatment or prevention of disease in human being may be purchased exempt from the tax by anyone pursuant to Va. Code §58.1-608(A)(7)(o). The department has a draft regulation relating to this exemption in which it was determined that contact lens cleaning solutions, disinfectants and saline solutions will be taxable and contact lens lubricating and rewetting solutions will be exempt. In addition, eye drops, lotions, ointments and washes for healing, treatment or therapeutic use, and decongestants will be exempt. I have enclosed a copy of the proposed regulation and list of taxable/exempt items developed by the department, however, please note that the final regulation has not been adopted.
I trust this answers your questions but should you have others, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner