Sales Tax Articles
Sales Tax State Activity Update - May 2006
New York Spares the Swab and Taxes the Towelette
The New York State Department of Taxation and Finance has issued an Advisory Opinion to address the taxability of alcohol prep swabs, iodine prep swabs and antiseptic towelettes when sold to persons using these items in the provision of medical services for compensation.
The alcohol and iodine prep swabs are used on patients to sterilize injection sites, while the antiseptic towelettes are used to sterilize or disinfect medical equipment and supplies; to wash, disinfect and cleanse practitioners' hands; and to otherwise prevent infection resulting from medical procedures.
Section 1115(a)(3) of the Tax Law provides an exemption for drugs and medicines for use, internally or externally, in the cure, mitigation, treatment or prevention of illnesses or diseases in human beings; medical equipment and supplies to be used for such purposes or to correct or alleviate physical incapacity; and products consumed by humans for the preservation of health. However, it is specifically noted that equipment and supplies for use in performing medical services for compensation are not eligible for this exemption.
Section 528.4(b)(2) of the sales tax regulations and Publication 840, A Guide To Sales Tax for Drugstores and Pharmacies, describe that the base used to contain the drug (oil, ointment, talc, cream, alcohol, etc.) and the medium used for delivery (disposable wipe, syringe, saturated pad, etc.) are not factors affecting a medicine's exempt status.
The alcohol and iodine prep swabs are considered to be drugs and medicines when sold in sterile packaging for use internally or externally to prevent illness or disease in humans. Therefore, these items are exempt regardless of the purchaser.
However, the antiseptic towelettes are not considered a drug or medicine. These towelettes are not applied internally or externally to an individual, but are generally used to sterilize medial equipment and to cleanse and disinfect the hands of a practitioner. The antiseptic towelettes are considered medical supplies. In this case, since the towelettes are being sold to persons for use in performing medical services for compensation, the above exemption is not applicable.
View the full text on the New York State Department of Taxation and Finance Website.
(TSB-A-06(13)S, New York State Department of Taxation and Finance, 4/11/06)
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