SALT Report 1259 – The New York State Department of Taxation and Finance ruled that a retailer’s sales of cosmetics containing an SPF of 2 or greater were taxable. The Department based their ruling on New York Tax Law §1115(a) (3) and 20 N.Y.C.R.R. §528.4 which provide an exemption for “[d]rugs and medications intended for use … in the cure, mitigation, treatment or prevention of illnesses in human beings … and in products consumed by humans for the preservation of health but not including cosmetics or toilet articles.”
The Sales and Use Tax Regulations are specific in their definition of what constitutes a product used for cosmetic purposes. The regulation states that anything “intended to be rubbed, poured, sprinkled or sprayed on, introduced into, or otherwise applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance … are subject to tax. Example: Cold creams, suntan lotions and makeup are taxable cosmetics.”
The retailer did not dispute that the products in question, which included facial moisturizers, lotions, and make-up in liquid or powdered form were cosmetics, however, he believed that the presence of an SPF made them cosmetically used medicinal items. Additionally, the examples provided by the retailer to the department as evidence consisted of products specifically labeled and marketed as cosmetics with sun protection as an added benefit.
Ultimately, the department ruled that the SPF ingredients in the retailer’s products are not drugs or medicines used to mitigate or prevent illness and that the presence of SPF alone does not transform the cosmetics into drugs or medicines. Therefore, cosmetics with an SPF are not eligible for a sales tax exemption under Tax Law §1115(a) (3) and Regulation §528.4(a) (3) which clearly states that cosmetics are taxable.
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