Sales Tax Articles
Sales Tax State Activity Update - June 2006
Texas Coughs-Up Clarification on Over the Counter Medications
The Texas Comptroller of Public Accounts, in responding to a taxpayer inquiry, has clarified several issues relating to the exemption for over-the-counter drugs or medicines, as well as interpreted the taxability of several specific items.
Tax Code ยง151.313 provides an exemption for a non-prescribed drug or medicine if the product is:
- Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, illness, injury, or pain;
- Applied to the human body or is a product that a human ingests or inhales;
- Not an appliance or device
- Not food; or the product is labeled or required to be labeled with a "Drug Facts" panel in accordance with regulations of the federal Food and Drug Administration.
A previous Texas Letter Ruling indicated that items without a Drug Facts panel were exempt depending on use, and such an exemption required the purchaser to provide the seller with a valid exemption certificate. However, this previous ruling dealt with multiple use products, such as cotton balls, that did not contain ingredients intended to mitigate, treat or prevent injury or illness. An exemption certificate was necessary to prove their use in the treatment of injury or illness. It is emphasized in the current ruling that when a product has an ingredient that is recognized to mitigate, treat, prevent, or cure, there is no requirement that an exemption certificate be provided.
Also discussed were the taxability of product kits that contained both exempt medicine items, such as fluoride toothpaste and mouthrinse, and taxable non-medicine items, such as toothbrushes and tongue scrapers. Such combo kits will be exempt if the cost of the exempt items exceeds the cost of the taxable items.
Finally, the Comptroller addressed the taxability of oral hygiene products containing stabilized chlorine dioxide, which mitigates the development of periodontal disease, and of aloe vera creams used to relieve pain from sunburn, insect bites, cuts and scrapes. Both item types qualify for the exemption outlined above when sold for human use.
The full text can be viewed on The Texas State Comptroller Website.
(Texas Comptroller of Public Accounts, STAR System - 200604546L, 04/24/06)
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