Did Maryland charge sales tax on prescription pet food and flea and tick products sold by veterinarians?

Plain-English summary

The Director of the Retail Sales Tax Division asked the Attorney General whether prescription diet foods for dogs and cats, and flea and tick prevention products like powders and sprays, sold by veterinarians qualified for the Maryland Retail Sales Tax Act's exemption for medicines. The opinion concluded that neither category of product was exempt, applying the rule that tax exemptions are strictly construed against the taxpayer and in favor of the state. It found that veterinarians are not "physicians" and veterinary hospitals are not "hospitals" within the meaning of the medicines exemption, and that the Comptroller had already, and reasonably, determined under its own regulation that comparable diet and insect-repellent products for human use are not "medicines," a determination the opinion saw no basis to treat differently for animal versions of the same products. The opinion likewise rejected the "food for human consumption" exemption, since pet food obviously is not for human consumption, and the "agricultural purposes" exemption, since a 1966 Circuit Court decision had already held that household pets like dogs are not "livestock" for that exemption's purposes, drawing on the General Assembly's own consistent distinction elsewhere in the Agriculture Article between farm animals and household pets. The opinion did find one narrow exemption available: when a veterinarian dispensed these products as an inconsequential part of a professional service without a separate charge, the transaction with the pet owner fell under the exemption for professional services, though the veterinarian would still have had to pay sales tax when originally purchasing the products for that use.

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion applied the Maryland Retail Sales Tax Act as then codified in Article 81 of the Maryland Code, along with a 1966 unreported Circuit Court decision and a series of Comptroller bulletins and regulations from the 1970s and early 1980s. Maryland's sales tax statute has since been recodified into the Tax-General Article, and specific exemptions, regulations, and administrative interpretations may have changed since 1983; verify the current Tax-General Article and current Comptroller regulations before relying on any specific exemption rule described here.

Common questions

Did Maryland's sales tax exemption for medicines cover prescription pet food or flea and tick treatments sold by a vet?
No, according to this opinion. It found veterinarians are not "physicians" and veterinary facilities are not "hospitals" under the medicines exemption, and that the Comptroller had already determined, for comparable human products, that special diet foods and insect repellents are not "medicines" under its own regulation, a determination the opinion saw no reason to treat differently just because the products were for animals.

Could pet food qualify as tax-exempt "food for human consumption"?
No. The opinion found this exemption plainly inapplicable because pet food, prescription or otherwise, is not food intended for human consumption.

Could flea and tick sprays or prescription diets for dogs qualify under the sales tax exemption for agricultural items like livestock feed?
No, according to this opinion, at least not for household pets. It relied on a 1966 Circuit Court for Caroline County decision holding that "the exemption of livestock and food for livestock does not include dogs and food for dogs," and noted the General Assembly had consistently distinguished farm animals from household pets elsewhere in the Agriculture Article.

Was there any way a veterinarian could dispense these products to a pet owner without charging sales tax?
Yes, in a narrow circumstance. The opinion found that if a veterinarian dispensed diet items or flea and tick products as an inconsequential part of rendering professional services, without a separate charge to the pet owner, the transaction fell within the sales tax exemption for professional services, though the veterinarian would still have owed sales tax when originally buying those products for that use.

Background and statutory framework

The opinion applied the strict-construction rule for tax exemptions recognized in Supervisor of Assessments v. Trustees of Bosley Methodist Church Graveyard and Suburban Propane Gas Corp. v. Tawes ("to doubt an exemption is to deny it"), reinforced by Article 81, §333's presumption that all sales are taxable until the taxpayer proves otherwise. Working through Article 81, §326(1)'s exemption for "medicines," the opinion found the specifically enumerated categories, prescription medical supplies and drugs sold to or by physicians and hospitals, inapplicable because veterinarians and veterinary hospitals do not meet the Health Occupations Article's definitions of "physician" and treatment facility, leaving only the residual category of "any other medicines as this term may be defined by regulations of the Comptroller." Applying the Comptroller's own regulatory definition of "medicine" in COMAR 03.06.01.19A(1), and the Comptroller's consistent administrative practice (Bulletin 81-1) treating comparable human diet aids and insect repellents as non-exempt, the opinion deferred to that interpretation under Comptroller v. Rockhill, Inc.'s rule that an agency's longstanding administrative construction of a tax statute is entitled to great weight.

The opinion then worked through two remaining exemptions the taxpayer might invoke. The "food for human consumption" exemption in §326(c) plainly did not reach pet food. The "agricultural purposes" exemption in §326(h), covering livestock, poultry, feed, and insecticides used "for agricultural purposes," was analyzed against the only reported Maryland authority on point, an unreported 1966 Circuit Court for Caroline County decision, Clifford Hughes v. State of Maryland, holding that dog breeding did not fall within the livestock exemption, itself drawing on the Court of Appeals' definition of "livestock" in Van Clief v. Comptroller as animals "kept for profit." The opinion reinforced this reading with the Agriculture Article's own repeated statutory distinctions between farm animals and household pets, and with the canon from Pennsylvania Nat'l Mut. Ins. Co. v. Gartelman that express statutory exclusions should not be judicially expanded. Finally, the opinion recognized a narrow escape valve in §326(j)'s exemption for professional services where sales are an "inconsequential element" with no separate charge, meaning a veterinarian who dispensed these products as part of treatment without billing for them separately owed no sales tax on that transaction with the pet owner, though the veterinarian remained liable for sales tax on the original purchase of the products.

Citations

Statutes:

• Article 81, §325(a) (imposition of the retail sales tax)
• Article 81, §326 (list of sales tax exemptions)
• Article 81, §326(1) (medicines and medical supplies exemption)
• Article 81, §326(c) (food for human consumption exemption)
• Article 81, §326(h) (agricultural purposes exemption)
• Article 81, §326(j) (professional, insurance, or personal service transactions exemption)
• Article 81, §328 (seller liability for sales tax)
• Article 81, §333 (presumption of taxability; resale certificate procedure)
• Article 81, §373 (Maryland Use Tax Act)
• Article 81, §375(a) (use tax not owed if sales tax already paid)
• Article 81, §375(b) (use tax exemption mirrors sales tax exemption)
• Article 81, §365(a) (Comptroller's general regulatory authority)
• §2-301(f) and (i) of the Agriculture Article (definitions of "practice of veterinary medicine" and "veterinarian")
• §14-101(h) and (i) of the Health Occupations Article (definitions of "physician" and "practice medicine")
• §19-301(e) of the Health-General Article (definition relevant to "hospital")
• Ag §2-313(6) (distinguishing household pet medicine from farm animal medicine)
• Ag §1-101(e) (definition of "livestock")
• Ag §3-301(c) (definition of "livestock")
• COMAR 03.06.01.19A(1) (Comptroller's regulatory definition of "medicine")
• COMAR 03.06.01.02 (sales tax liability for items used by a service provider)

Cases:

• Supervisor of Assessments v. Trustees of Bosley Methodist Church Graveyard, 293 Md. 208, 212 (1982)
• Suburban Propane Gas Corp. v. Tawes, 205 Md. 83, 87 (1953)
• Macke Company v. State Department of Assessments and Taxation, 264 Md. 121, 133 (1972)
• Comptroller v. Rockhill, Inc., 205 Md. 226, 232-33 (1954)
• Comptroller v. American Cyanamid Co., 240 Md. 491, 504-05 (1965)
• Smelser v. Criterion Ins. Co., 293 Md. 384, 388-89 (1982)
• Pennsylvania Nat'l Mut. Ins. Co. v. Gartelman, 288 Md. 151, 156 (1980)
• Van Clief v. Comptroller, 211 Md. 191, 194 (1956)
• Clifford Hughes v. State of Maryland, Comptroller of the Treasury, No. 2489 (Cir. Ct. for Caroline County, April 13, 1966)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1983/Volume68_1983.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

TAXATION

Retail Sales Tax—Exemptions—Veterinarians—Veterinary Items—Diet Items and Insecticide Products for Pets not Exempt From Sales Tax.

June 22, 1983

Mr. Stephen M. Cordi
Director
Retail Sales Tax Division

You have asked for our opinion as to whether, under the Maryland Retail Sales Tax Act, the tax exemption for sales of medicines and medical supplies applies to sales of certain veterinary items. Specifically, you have asked (1) whether sales of prescription diets for dogs and cats by a veterinarian are within the exemption applicable to the sale of medicines, and (2) whether products such as powders and sprays designed to prevent flea and tick infestation of pets, when used or sold by veterinarians, are within the exemption applicable to the sale of medicines.

For the reasons given below, we have concluded that diet items and insecticide powders and sprays for dogs and cats sold by a veterinarian to a pet owner, or sold to a veterinarian for his or her own use in treating pets, are not exempt from the sales tax.1

1 Under the Maryland Use Tax Act, an excise tax must be paid for the privilege of using, storing, or consuming certain property and services. Article 81, §373 of the Maryland Code. However, "[t]angible personal property expressly exempted from the retail sales tax" is also exempt from the use tax. Article 81, §375(b). Thus, our conclusion about the status of these veterinary items under the exemption provisions of the Maryland Sales Tax applies equally to the Maryland Use Tax Act. Of course, if sales tax has been paid, the use tax need not be paid. Article 81, §375(a).

I
Statutory Background

The Maryland Retail Sales Tax Act levies a tax "[f]or the privilege of selling certain tangible personal property at retail". Article 81, §325(a) of the Maryland Code. Under the Act, the amount of the sales tax is based on the price charged for the property or service and the tax is collected by the seller from the buyer.

In §326, the Act lists the kinds of transactions that are exempt from the tax. In considering whether any of these exemptions apply to the veterinary items in question, we follow the well-established rule that exemptions from taxation should be "strictly construed in favor of the State". Supervisor of Assessments v. Trustees of Bosley Methodist Church Graveyard, 293 Md. 208, 212 (1982). The Maryland Court of Appeals has frequently observed that "[t]o doubt an exemption is to deny it". Suburban Propane Gas Corp. v. Tawes, 205 Md. 83, 87 (1953). See also Macke Company v. State Department of Assessments and Taxation, 264 Md. 121, 133 (1972) ("real doubt" about applicability of exemption to be resolved in favor of the State).

Indeed, the Act itself specifies that: "It shall be presumed that all sales of tangible personal property and services mentioned in this subtitle are subject to tax until the contrary is established, and the burden of proving that a sale is not taxable hereunder shall be upon the vendor or the purchaser as the case may be." Article 81, §333.

II
Applicability of Sales Tax Exemptions

With these principles for construing tax exemptions in mind, we examine whether sales of prescription pet foods and of products for the treatment of tick and flea infestation are within the exemptions established by Article 81, §326.

A. Exemption for Medicines

The particular exemption about which you inquire is Article 81, §326(1): "Sales of medicines and disposable medical supplies sold on prescriptions of physicians, or medicines compounded, processed or blended by a druggist offering the same for sale at retail, or sales of drugs or medical supplies to physicians or hospitals or by physicians and hospitals to patients in connection with medical treatments, sales of baby oils and baby powders, and any other medicines as this term may be defined by regulations of the Comptroller."

It is readily apparent that prescription pet foods and insecticides do not come within the first several of the alternative bases for exemption under Article 81, §326(1). These items are neither "medical supplies sold on prescriptions of physicians" nor "drugs or medical supplies [sold] to physicians or hospitals or by physicians and hospitals to patients in connection with medical treatments", because a veterinarian is not a "physician". Compare §2-301(f) and (i) of the Agriculture Article of the Maryland Code ("Ag" Article) (defining "practice of veterinary medicine" and "veterinarian") with §14-101(h) and (i) of the Health Occupations Article of the Maryland Code (defining "physician" and "practice medicine").2 Moreover, the facts do not indicate that any of these products are "medicines compounded, processed or blended by a druggist offering the same for sale at retail".

2 A veterinary hospital is likewise not a "hospital", within the meaning of this provision. In context, this term plainly means a treatment facility for humans. See §19-301(e) of the Health-General Article of the Maryland Code.

Thus, the purchase or sale of the products in question by veterinarians would be exempt under §326(1) only if they are "any other medicines as this term may be defined by regulations of the Comptroller".3 The Comptroller's Sales Tax Regulation governing sales of medicines, medical supplies, and physical aid and sick room equipment defines the term "medicine" as follows: "'Medicine' means a preparation or substance intended for use in the cure, mitigation, treatment, or prevention of illnesses. The term includes drugs sold on prescriptions of physicians, drugs for which no prescription is required, and proprietary and patent medicines. The term does not include cosmetics, dentifrices, shaving and hair care products, soaps, or deodorants. A product which is primarily cosmetic in nature is not 'medicine' even though it may contain medicinal properties." COMAR 03.06.01.19A(1).

3 The Comptroller also has more general authority under §365(a) of the Act to "make, adopt and amend such rules and regulations as he shall deem necessary to carry out the provisions of this subtitle and to define any terms used therein".

In applying this regulatory definition, the Comptroller has consistently determined that both special diet foods and insect repellents for human use are not exempt from taxation under §326(1), because they are not "medicines". For example, in Bulletin 81-1 of the Comptroller of the Treasury, the Retail Sales Tax Division discusses what constitutes "medicine and medical supplies" under §326(1) and expressly states that insect sprays do not fall within that term. Accordingly, the sale of these products is considered to be taxable. If diet aids and insecticides for human use are not exempt under the Comptroller's regulation, we do not see how these kinds of products would be exempt when used for animals.4

4 We do not intend to suggest that the Comptroller lacks discretion to define various veterinary items as "medicines"; indeed, we understand that the Comptroller has in fact so defined some such items. Our point is the converse: when the Comptroller has properly determined that a type of product for human use is not a "medicine" under §326(1), there is no basis for assuming that a comparable product for animal use should be considered a "medicine".

The Comptroller's construction of this regulation is entitled to great weight: "The sales tax is an excise tax imposed by the Legislature in the exercise of the police power of the State. The Legislature, in [then] Section 361 of the Retail Sales Tax Act, authorized the Comptroller to adopt such rules and regulations as he shall deem necessary to carry out the provisions of the Act and to define any terms used therein. It is universally recognized that it would be impossible for the Legislature to deal directly with the multitude of details in the complex conditions upon which it legislates, and so it has become customary for the Legislature to delegate to each administrative agency the power to make rules and regulations to carry legislation into effect. Unless an administrative officer or department is permitted to make reasonable rules and regulations, it would be impossible in many instances to apply and enforce the legislative enactments, and the good to be accomplished would be entirely lost. We have recognized that the interpretation placed by the State Comptroller upon the Retail Sales Tax Act is entitled to great weight as an administrative interpretation acquiesced in by the Legislature." Comptroller v. Rockhill, Inc., 205 Md. 226, 232-33 (1954). Cf. Comptroller v. American Cyanamid Co., 240 Md. 491, 504-05 (1965).5

5 We note that many other states with retail sales tax acts similar to that enacted in Maryland likewise do not exempt prescription dog and cat foods or flea and tick powders and sprays from retail sales tax. See, e.g., Idaho Code §63.3622 (Supp. 1982) and Reg. 22-11B, Sales Tax Rep. (CCH) *133-5856 (Feb. 1979); Ind. Code Ann. §6-2.5-5-19 (Burns Supp. 1982) and Sales and Use Tax Circular ST-40, Sales Tax Rep. (CCH) 1135-927 (May 1, 1973); 1977 Ky. Rev. Stat. & R. Serv. 139.472 and 139.485 (Baldwin) and Regulation 103 KAR 26:090, Sales Tax Rep. (CCH) 38-333 (Jan. 8, 1975); Minn. Stat. Ann. §297A.25 (West Supp. 1982) and Regulation 600, Sales Tax Rep. (CCH) 1145-395 (Jan. 1979); Va. Code §58-441.6(s) (Supp. 1982) and Regulation Section 1-111, Sales Tax Rep. (CCH) 1173-611 (Jan. 1979).

Because prescription pet food and powders and sprays for flea and tick infestation are not within the purview of Article 81, §326(1), the sale of such products to or by a veterinarian is taxable unless another exemption applies.

B. Exemption for Food

Under Article 81, §326(c), certain "[s]ales of food for human consumption" are exempt from the sales tax. The prescription food in question is not "for human consumption"; this exemption, therefore, is inapplicable.

C. Exemption for Agricultural Items

Under Article 81, §326(h), "[s]ales of the following items for agricultural purposes" are exempt: "Livestock, poultry, seeds, feed for livestock and poultry, bedding or litter for poultry and livestock production fertilizers, lime and land plaster, fungicides, herbicides and insecticides, baler twine and baler wire; and the products of the farm, dairy, grove or garden, except those products which are usually sold by nurseries and horticulturists, including, but not limited to, flowers, sod, decorative trees and shrubs." Thus, sales of prescription food for livestock and poultry and sales of flea and tick insecticides are exempt from the sales tax, whether or not the transactions involve veterinarians, but only if the sales are "for agricultural purposes".

Under the familiar canon of statutory construction: "The cardinal rule ... is to ascertain and carry out the real legislative intent. In determining that intent, the Court considers the language of an enactment in its natural and ordinary signification." Smelser v. Criterion Ins. Co., 293 Md. 384, 388-89 (1982).

The term "agriculture" has been defined as follows: "The act or science of cultivating the ground, and raising and harvesting crops, often including also feeding, breeding, and management of livestock; tillage; husbandry; farming; in a broader sense, the science and art of the production of plants and animals useful to man, including to a variable extent the preparation of these products for man's use and their disposal by marketing or otherwise. In this broad use it includes farming, horticulture, forestry, dairying, sugar making, etc." Webster's New International Dictionary 52 (2d ed. 1953). Certainly, the maintenance of household pets does not come within this definition.

Because the General Assembly expressly limited the exemption set forth in §326(h) to items used "for agricultural purposes", it implicitly made the same items taxable when sold for other than agricultural purposes, for example, when sold for the care of household pets. Where a statute expressly provides for certain exclusions, others should not be inserted. Pennsylvania Nat'l Mut. Ins. Co. v. Gartelman, 288 Md. 151, 156 (1980).

The only case interpreting Article 81, §326(h) supports our reading. The issue in this unreported case was whether the raising of dogs falls within the "agricultural purposes" exemption set forth in §326(h). Clifford Hughes v. State of Maryland, Comptroller of the Treasury, No. 2489 (Cir. Ct. for Caroline County, April 13, 1966). The Court noted that, in Van Clief v. Comptroller, 211 Md. 191, 194 (1956), the Maryland Court of Appeals had quoted with approval the definition of the term "livestock" in Webster's New International Dictionary at 1446: "Domestic animals used or raised on a farm, esp. those kept for profit". Citing supporting cases from other jurisdictions, the Circuit Court for Caroline County specifically held that "the exemption of livestock and food for livestock does not include dogs and food for dogs".6

6 In contexts other than the Retail Sales Tax Act, the General Assembly similarly has differentiated between farm animals and household pets. For example, Ag §2-313(6) specifically distinguishes between medicine given to "a household pet" and medicine given to "farm animals, poultry, fowl or other animals". See also Ag §1-101(e) ("'Livestock' means living or dead cattle, equines, goats, sheep or swine"); Ag §3-301(c) ("'Livestock' means cattle, swine, sheep, or goats").

Thus, items sold for household pets do not qualify for the exemption set forth in Article 81, §326(h).

D. Exemption for Professional Services

Article 81, §326(j) contains the following exemption: "Professional, insurance or personal service transactions which involve sales as inconsequential elements for which no separate charges are made."

The Comptroller has construed services rendered by a veterinarian as being within the scope of §326(j). Thus, for example, if in the course of rendering professional services a veterinarian chooses to dispense special food items or flea and tick preparations without separate charge, the transaction between the veterinarian and the pet owner would be exempt from sales tax. In such a situation, however, the veterinarian would be required to have paid sales tax when he or she first purchased the products for this use. COMAR 03.06.01.02. (Persons selling those items to veterinarians would, in turn, be liable to the State for the sales tax. Article 81, §328.)

On the other hand, if a veterinarian sells these products as part of a separate retail sale, that transaction itself would be subject to taxation. In such an instance, the veterinarian may give the supplier a resale certificate, indicating an intention to resell the items, and thereby avoiding having to pay sales tax on his or her own purchases. Article 81, §333. The veterinarian then would be required to charge the customer sales tax on these items when later sold at retail.

III
Conclusion

In summary, it is our opinion that diet items and insecticide powders and sprays for dogs and cats sold by a veterinarian to a pet owner, or sold to a veterinarian for his or her own use in treating pets, are not exempt from the sales tax.

Stephen H. Sachs, Attorney General
Linda Koerber Boyd, Assistant Attorney General
Avery Aisenstark
Chief Counsel
Opinions and Advice