Tax Type
Retail Sales and Use Tax
Description
Drug samples; Use tax
Topic
Property Subject to Tax
Date Issued
04-20-1994
April 20, 1994
Re: Ruling Request: Retail Sales and Use Tax
Dear***************
This will reply to your letter of March 17, 1993 in which you request a ruling regarding the application of sales and use tax to prescription drug samples distributed by ************** the Taxpayer.
FACTS
The Taxpayer is a pharmaceutical manufacturer domiciled in New Jersey with a separate manufacturing division for an unrelated product located in Virginia. Sales representatives solicit orders for drug samples within the state and distribute samples upon visiting licensed physicians and pharmacists for promotional purposes. Drug samples are shipped, via common carrier, directly from distribution centers outside Virginia to licensed physicians and pharmacies as a result of the sales representatives' order requests. The Taxpayer questions whether its distribution of drug samples in either case is exempt under Va. Code §58.1-609.7(1) as controlled drugs for use or distribution by a licensed physician or as transactions occurring in interstate commerce.
RULING
The department has recently ruled on the tax treatment of drug samples in P.D. 94-78 (3/21/94) and P.D. 94-97 (3/31/94) where the facts were similar to those presented by the Taxpayer here. In both cases, the Taxpayers were out-of-state pharmaceutical manufacturers who maintained sales forces in the state and distributed free drug samples in Virginia to licensed physicians and other health care providers. The central issue was not the distribution of controlled drugs for sale or use by licensed physicians, but rather the distribution of samples in Virginia for purposes other than resale. As such, in both instances the Taxpayers exercised a use over the samples and since no tax was paid to the state where the samples were withdrawn from inventory and a taxable use was made in Virginia, the tax was due to Virginia.
Further, the department has also ruled on drug samples in P.D. 89-254 (9/21/89), copy enclosed, which also discusses the application of the tax to sales of controlled drugs in Virginia.
I hope the foregoing has responded to your inquiry and if you have additional questions please contact the department.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/6861J
Rulings of the Tax Commissioner