TR 17: Drugs

Drugs are classified as either, "dispensed in accordance with a prescription"(prescription and/or chart ordered drugs) or as "over-the-counter". Drugs dispensed in accordance with a prescription are usually exempt from sales/use tax, but over-the-counter drugs are taxable. Sales of drugs for use on non-humans are taxable. This includes prescriptions written by veterinarians.

"Drugs dispensed in accordance with a prescription means drugs dispensed in accordance with an order in writing dated and signed by a licensed physician, or given orally by or on behalf of a licensed physician, and immediately reduced to writing by a pharmacist, assistant pharmacist, or pharmacy intern, specifying the name and address of the person for whom the medicine or drug is offered and directions, if any, to be placed on the label." (section 3-1-1 , BRC, 1981) These prescription drugs, when prescribed in writing by a licensed physician as "chart ordered" and administered from a pharmacy during a patient's stay in a hospital are exempt from taxation, provided that they are separately billed to a specific patient.

Drugs purchased in bulk by outpatient facilities are exempt from sales/use tax, provided there is directive written by a licensed practitioner for a specific patient and there is a separate billing to the patient. Any drugs purchased that do not meet this requirement are considered to be consumed by the facility in providing medical services and would, therefore, be taxable to the facility. However, any vaccination or immunization drug that is regulated by U.S. federal or state governments is exempt.

Over-the-counter drugs are purchased without a prescription and are usually prepackaged and sold to the general public. Therefore, they are subject to sales/use tax. Over-the-counter drugs include, but are not limited to, aspirin, pain relievers, cold remedies, ointments, cough syrup, vitamins and food supplements. Over-the-counter drugs are exempt from taxation only when prescribed for immediate dispensation from a hospital or medical clinic pharmacy by a licensed physician for treatment during a patient’s stay, provided that they are separately billed to a specific patient.

Examples:

1. A doctor writes a prescription for an antibiotic for his patient and tells him to take aspirin and cough syrup every four hours. The patient goes to the pharmacy and purchases the antibiotic prescription, aspirin and cough syrup. The antibiotic is exempt from sales/use tax, but the aspirin and cough syrup are taxable because there were no prescriptions written and over-the-counter products were purchased.
2. A patient is admitted to a hospital and a physician orders the following for his care: Tylenol, IV fluids and antacid. The order is dispensed by the hospital pharmacy on behalf of the physician and will be itemized on the patient's bill. These items will be exempt from sales/use tax.
3. A patient visits his physician because he stepped on a rusty nail. The physician administers novocaine, removes the nail, cleans up the wound and gives the patient a tetanus shot. The bill separately states the tetanus shot but not the novocaine. Therefore, the tetanus shot is exempt from sales/use tax. The physician must pay sales/use tax for the novocaine because it was consumed by the physician in providing medical services.

Last Updated on Wednesday, 11 July 2012 12:22