SALT Report 2011 – The Indiana Department of Revenue issued a letter ruling regarding a sales tax assessment imposed on a Veterinarian’s sales of medical products. During an audit, the Department found that the Taxpayer had not collected sales tax on its sales of flea medications and Elizabethan collars and issued the sales tax assessment. The Taxpayer protested the assessment.
In his argument, the Taxpayer claimed that the flea medications and Elizabethan collars were sold pursuant to a prescription by veterinarians who are licensed to dispense medications and equipment to treat animals. Further, under IC § 6-2.5-5-19(c)(2) the sale of flea medications is exempt when sold by licensed practitioners regardless of whether the sale is of legend or non-legend drugs.
Legend drugs are exempt from the state gross retail tax if:
- A registered pharmacist makes the sale upon the prescription of a practitioner who is licensed to prescribe, dispense, and administer those drugs to human beings or animals in the course of his professional practice, or
- The licensed practitioner makes the sales
And, sales of non-legend drugs are exempt from the state gross retail tax if:
- The non-legend drug is dispensed upon an original prescription or a drug order; and
- The ultimate user of the drug is a person confined to a hospital or health care facility
The Department determined that the Taxpayer met the conditions for the exemption because the veterinarians working in the office are licensed practitioners and that the flea medications are drugs. Therefore, the Taxpayer was not liable for sales tax on its sales of flea medications to its patients.
However, the Elizabethan collars prescribed by the Taxpayer to its patients are taxable because they are not medical equipment “directly required to correct or alleviate injury to a malfunction of or removal of a portion of the user’s body” rather, the collars are used as a preventative measure.
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