The legal definition of a medicine varies slightly from state-to-state, but it generally includes any pill, powder or substance that is intended to treat, cure or mitigate human disease or ailments and has medicinal qualities. For the purposes of this blog post, the definition does not include medical devices, prostheses, supplies (including bandages), personal hygiene products or medicinal marijuana, all of which will be addressed in subsequent postings. Finally, a prescription medicine is one that is ordered by a licensed member of the medical profession, and an over-the-counter (OTC) medicine is any medicine, as defined above, that may be purchased without a prescription.
States which currently tax prescription medicine:
There are only two (2) states which currently tax prescription medicine: Illinois and Georgia.
- Illinois - currently subjects prescription medicine to a reduced rate of tax.
- Georgia - exempts prescription medicine from tax but OTC medicine such as aspirin, acetaminophen, ibuprofen, cold remedies, antacids, laxatives, and cold sore gels are subject to tax, even if purchased under a prescription.
In every other state, prescription medicines are exempt from tax.
States in which OTC medicine is currently tax-exempt:
OTC medicine is generally tax-exempt in the following eight (8) states/jurisdictions:
- District of Columbia (as of 4/1/2015), Maryland, Minnesota, New Jersey, New York, Pennsylvania, Vermont and Virginia.
The following states have enacted qualified exemptions for OTC medicines:
- Connecticut - as of 4/1/2015, certain OTC medicines are exempt from tax including: vitamin or mineral concentrates; dietary supplements; natural or herbal drugs or medicines; products intended to be taken for coughs, colds, asthma or allergies, or antihistamines; laxatives; antidiarrheal medicines; analgesics; antibiotic, antibacterial, antiviral and antifungal medicines; antiseptics; astringents; anesthetics; steroidal medicines; anthelmintics; emetics and antiemetics; antacids; and any medication prepared to be used in the eyes, ears, or nose. Specifically excluded from the exemption are cosmetics and personal hygiene items like deodorant and mouthwash.
- South Carolina - OTC medicines are exempt from tax when they are sold to a health care clinic that provides medical care without charge to its patients.
- Texas - OTC medicine is exempt if it is required to be labeled with a "Drug Facts" panel by the federal Food and Drug Administration.
- Missouri - OTC medicine is exempt from tax when purchased by an individual with a disability or by the individual's agent.
States which currently tax OTC medicine:
The following thirty-three (33) states currently tax OTC medicine:
- Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois (subject to a low rate of tax), Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Mississippi, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin and Wyoming.
This is my first post to this blog, so I would really appreciate any feedback you would be willing to provide. My goal is to make this blog informative and interesting for companies in this industry - that's to say as interesting as multistate sales and use tax can be.
NOTE: The COMMENTS feature is no longer available for this post. If you are a CONSUMER with questions about tax on prescriptions, please contact your state’s Department of Revenue (or equivalent) for assistance.
Other recent “Medical Industry Tax” posts by James R. Dumler:
- California Medical Marijuana Retailers: Tax Update & Exemption Rules
- Sales & Use Tax Refund Opportunities: Durable Medical Equipment
- Medical Equipment Tax Change Opens Door: CA Regulation 1591
- Taxability of Medical Database Subscriptions in Arizona
- Medical Industry Tax Updates: Sales & Use Tax Updates #3