Tax Bulletins
Document Number:98-98
Bulletin Number: VTB 98-4
Tax Type:Retail Sales and Use Tax
Brief Description:Exemption for nonprescription drugs and proprietary medicines
Topics:Exemptions; Taxable Transactions
Date Issued:05/15/1998
Tax Bulletin 13-5 updates and supersedes this Tax Bulletin (VTB) 98-4

Virginia Department of Taxation

May 15, 1998

Retail Sales and Use Tax: Exemption for Nonprescription Drugs
and Proprietary Medicines

Effective July 1, 1998, nonprescription drugs and proprietary medicines will be exempt from the retail sales and use tax. "Nonprescription drugs" include any substances or mixture of substances containing medicines or drugs for which no prescription is required and which are generally sold for internal or topical use in the cure, mitigation, treatment, or prevention of disease in human beings. This exemption is also applicable to "proprietary medicines" which is any nonprescription drug sold to the general public under the brand name or trade name of the manufacturer and which does not contain any controlled substance or marijuana.

The exemption for nonprescription drugs and proprietary medicines does not apply to:

(1) cosmetics - articles applied to the body for cleansing, beautifying, promoting attractiveness or altering the appearance (includes makeup, body lotions, cold creams, and hair restoration products);

(2) toilet articles -articles advertised or held out for sale for grooming purposes (includes soaps, toothpastes, hair sprays, shaving products, colognes, deodorants, and mouthwashes);

(3) food products and supplements - including those classified as such by the Federal Food and Drug Administration (includes herbal teas, drinks, pills, or supplements, diet aids, and weight control preparations);

(4) vitamins and mineral concentrates sold as dietary supplements or adjuncts (except when sold pursuant to a written prescription by a licensed physician, nurse practitioner, or physician's assistant); and

(5) devices - includes contraceptive items, birth control preparations, and testing kits. Diabetic testing kits will continue to be exempt under a separate exemption for specific medical equipment.

This exemption is applicable regardless of the nature of the purchaser. Thus, nonprescription drugs and proprietary medicines may be purchased tax exempt by individuals, physicians, medical facilities, and all other entities. Retail dealers making sales of nonprescription drugs and proprietary medicines must keep records segregating purchases and sales of exempt items.

In addition, effective July 1, 1998, samples of nonprescription drugs and proprietary medicines distributed free of charge by the manufacturer are exempt from the sales and use tax. Currently, pharmaceutical manufacturers are subject to the use tax, based on the cost price, of samples distributed in Virginia by their salespersons.

Tax Status of Various Types of Nonprescription Drugs and Proprietary Medicines

Examples of taxable and exempt nonprescription drugs and proprietary medicines are listed below. This list is intended as a guide and is not intended to be all inclusive.

Exempt item
Taxable item


Background

The 1990 General Assembly passed Senate Bill 317 (Chapter 117, 1990 Acts of Assembly) to provide an exemption from the sales and use tax for nonprescription drugs and proprietary medicines purchased for the cure, mitigation, treatment, or prevention of disease in human beings. The exemption was originally to be effective July 1, 1992. However, the effective date has been deferred every two years since 1992, with the last action passed in 1996, when the exemption's effective date was deferred to July 1, 1998. Subsequently, no action has been taken by the General Assembly to defer the effective date again; therefore, the exemption is effective July 1, 1998.

The 1997 General Assembly passed House Bill 1665 (Chapter 696, 1997 Acts of Assembly) which expanded this exemption to samples of nonprescription drugs and proprietary medicines distributed free of charge by the manufacturer, including packaging materials and constituent elements and ingredients. The effective date of this exemption coincides with the effective date of the exemption for nonprescription drugs and proprietary medicines.

For additional information: If there are any questions about whether or not a particular item qualifies for exemption, please contact the Office of Customer Services, Virginia Department of Taxation, (804) 367-8037.


Tax Bulletin 13-5 updates and supersedes this Tax Bulletin (VTB) 98-4



Related Policy Documents:

VTB 13-5