Virginia – Anti-Bacterial Products Do Not Qualify for Non-Prescription Drug Exemption


SALT Report 2055 – The Virginia Tax Commissioner issued a ruling regarding the sales and use tax exemption for nonprescription drugs as it applies to various anti-bacterial products.  In a previous ruling, the Commissioner denied the Taxpayer’s use of the exemption on its sales of anti-bacterial products because they included skin nourishing and softening ingredients and fragrances.  The Taxpayer appealed the decision and referenced the state’s Nonprescription Drug Exemption Question and Answer Summary which infers that the exemption applies to anti-bacterial products.

In his argument, the Taxpayer argued that based on the language of the Q&A Summary it was the intention of the General Assembly to exempt all consumer over-the-counter antiseptic drugs if they are recognized by the FDA and contain a non-prescription drug and are marketed as such.   Accordingly, the Taxpayer believes, that his anti-bacterial products qualify for the non-prescription drug exemption.

In his review of the case, the Commissioner referred to Virginia Code § 58.1-609.10 14 which provides an exemption for “(i) any nonprescription drugs and proprietary medicines purchased for the cure, mitigation, treatment, or prevention of disease in human beings.”  However, subsection b of Virginia Code § 58.1-609.10 14 provides that, “the exemption authorized in this subdivision shall not apply to cosmetics.”

The Commissioner explained that the Department follows the FDA’s guidelines for the classification of products when determining sales and use tax exemptions.  In some cases, an item may be classified as a drug by the FDA, but if the product also contains coloring, perfume, or another similar additives it is considered a cosmetic or toiletry.  In this case, the anti-bacterial products in question fall within the FDA’s definition of an “antiseptic hand wash product” however, they also advertise that they provide skin nourishing and softening effects and come in a large selection of fragrances, which violates the intent of the statute.

Therefore, based on the facts presented, the Commissioner determined that the original decision was valid and that the anti-bacterial products in question do not qualify for the exemption for non-prescription drugs and proprietary medicines.

For Further Information

Virginia Department of Taxation – Rulings of the Tax Commissioner 1-13