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Sales Tax State Activity Update - January 2007

Collagen, Implants and Botox®, Oh My! California "Injects" New Life into Medicine Definition

A California State Board of Equalization newsletter reminds taxpayers of a change in the definition of "medicine" that became effective August 26, 2006, with the amending of Regulation 1591. "Medicine" now includes any product fully implanted or injected in the human body, or any drug or biologic, when approved by the U.S. Food and Drug Administration (FDA) to diagnose, cure, mitigate, treat, or prevent any disease, illness, or medical condition, regardless of ultimate use.

This expanded definition allows the following items to qualify as medicines regardless of the patient's motivation for treatment.

• Botox® and Botox®Cosmetic - These injected biologics treat moderate to severe frown lines between the eyebrows, a non-serious medical condition.
• Breast Implants - These implants are approved for both cosmetic and reconstructive surgeries. Previously, cosmetic implants could not qualify as medicines.
• Injected Collagen, and other Dermal Implants - These implants are approved for the correction of skin contour deficiencies such as wrinkles and acne scars. Previously, these implants qualified as medicines only when used to correct scarring. Now, these are also considered medicines when used to correct the appearance of lines and wrinkles from aging.

The newsletter concludes its discussion of this topic by reminding taxpayers that a product which meets the definition of a "medicine" is not automatically exempt from sales and use tax. Regulation 1591 states that medicines are exempt when sold or furnished under one of the following conditions:

1. Prescribed for the treatment of a human being by a person authorized to prescribe the medicines, and dispensed on prescription filled by a pharmacist in accordance with law, or
2. furnished by a licensed physician, dentist or podiatrist to his or her own patient for treatment of the patient, or
3. furnished by a health facility for treatment of any person pursuant to the order of a licensed physician, dentist or podiatrist, or
4. sold to a licensed physician, dentist, podiatrist or health facility for the treatment of a human being, or
5. sold to this state or any political subdivision or municipal corporation thereof, for use in the treatment of a human being; or furnished for the treatment of a human being by a medical facility or clinic maintained by this state or any political subdivision or municipal corporation thereof, or
6. furnished by a pharmaceutical manufacturer or distributor without charge to a licensed physician, surgeon, dentist, podiatrist, or health facility for the treatment of a human being, or to an institution of higher education for instruction or research.

The full text may be accessed on the California Board of Equilization website.

(California State Board of Equalization, Tax Information Bulletin, 12/06)

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