Virginia – Taxability of Non-prescription Drugs and Proprietary Medicines

SALT Report 2257 – Due to recent changes in the sales and use tax laws, the Virginia Department of Taxation has issued a bulletin that discusses the exemption for non-prescription drugs and proprietary medicines.

The Bulletin clarifies that the exemption for “nonprescription drugs and proprietary medicines purchased for the cure, mitigation, treatment, or prevention of disease in human beings” also applies to samples of these items when distributed free of charge by the manufacturer.

To determine whether the non-prescription drug exemption applies, the following three criteria must be considered:

  • Is the item a non-prescription drug or proprietary medicine?
  • Is the product sold for internal or topical use?
  • Is the product sold for the cure, mitigation, treatment or prevention of disease in human beings?

Generally, items that meet these criteria will be exempt however; the following product categories do not qualify as non-prescription drugs:

Cosmetics – These are items that are applied to the body for cleansing, beautifying, promoting attractiveness, or altering the appearance. This includes makeup, lotions, creams, moisturizers, and hair restoration products, regardless of whether they contain non-prescription drugs or other medicinal ingredients,

Toilet articles – This includes items that are advertised or sold for grooming purposes, such as soap, toothpaste, hair spray, shaving products, cologne, deodorant, and mouthwash,

Food products and supplements – These are items that are classified by the Federal Food and Drug Administration and include herbal teas, drinks, pills, supplements, and diet or weight control aids,

Vitamins and mineral concentrates – These items are not exempt when sold as a dietary supplement or aid. However, if these items are sold pursuant to a prescription by a licensed physician, nurse practitioner, or physician’s assistant, they will qualify for the exemption,

Devices – This includes birth control and contraceptive items and testing kits,
Products with natural and herbal ingredients – If these items do not contain a non-prescription drug or proprietary medicine or do not treat, cure, or prevent disease in human beings they are not exempt, and

Products that contain non-prescription drugs or other medicinal ingredients – These items are not exempt if the stated ingredient serves as a secondary function to the intended use of the product

Additionally, the bulletin addresses the following changes to certain product classifications as well as their taxability:

Glycolic acid  Glycolic acid is considered a cosmetic used for smoothing skin, removing age spots or wrinkles, and for skin lightening purposes. Because the intended use of these products is to beautify, promote attractiveness, or alter the appearance they do not qualify as a non-prescription drug,

Homeopathic medicines – If a homeopathic product is classified as a drug by the FDA and is used internally or topically, for the cure, treatment, mitigation, or prevention of disease in human beings, the product is exempt,

Non-prescription drugs packaged with other items – Sales of non-prescription items that are packaged with items that do not qualify for the exemption are subject to tax on the full retail price,

Products that require OTC registration  These products are only exempt if they contain medicines or drugs, are used internally or topically, and are intended for the treatment or prevention of disease in human beings, and

Sensitive care products – This includes lotions, soap-free cleaners, and medicated products used to treat a number of medical conditions. The taxability of these items will be determined on a case-by-case basis, based on the active ingredients and the products intended purpose

Forms and Record Keeping

Sales made pursuant to the non-prescription drug exemption must be included with all other exempt sales on the retailer’s sales tax return, Form ST-9. Additionally, retailers must keep records that segregate the purchases and sales of exempt items from non-exempts items.

This bulletin updates and supersedes Virginia Tax Bulletin (VTB) 98-4.

For Further Information

Virginia Department of Taxation – Tax Bulletin 13-5