SALT Report 1590 – The New York Department of Taxation and Finance issued an Advisory Opinion regarding the taxability of products that contain Benzoyl Peroxide or Salicylic Acid and are used to treat acne. The products in question list 10% Benzoyl Peroxide and 2% Salicylic Acid as their active ingredient and provide a statement noting that the active ingredient is an acne medication or treatment that:
- Will help you see fewer blackheads
- Will exfoliate to lift dirt and oil away
- Will reduce redness and pimple size
- Will exfoliate to prevent blemishes and cleans pores, and
- Is the same acne medication prescribed by doctors
New York Tax Law §1115(a)(3) provides an exemption for “[d]rugs and medicines intended for use, internally or externally, in the cure, mitigation, treatment or prevention of illnesses in human beings…and products consumed by humans for the preservation of health but not including cosmetics or toilet articles notwithstanding the presence of medicinal ingredients therein…”
In determining whether these products are treatments for acne, the Department referred to the US Food and Drug Administration’s list of approved ingredients in topical acne drug products. This list includes benzoyl peroxide up to 10% and salicylic acid up to 2%.
Therefore, because the active ingredients noted on the packaging are either 10% Benzoyl Peroxide or 2% Salicylic acid, the Department determined that these products are exempt from state sales tax under 20 N.Y.C.R.R. § 528(b)(3)because they contain an FDA recognized drug or medication for use in treating acne.
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