Are a licensed pharmacist's consultation services to nursing homes — including in-service training of staff — taxable business-management services in Connecticut?

Plain-English summary

A licensed pharmacist provided "pharmacy consultation services" to skilled and intermediate care nursing facilities: a monthly review of whether patients' drugs were appropriate, reviewing dosages, assessing drug regimens, monitoring vital signs, observing patients, and running in-service training for the nursing home's own staff. The question was whether Connecticut's sales tax on business-management services reached any of that.

Connecticut taxes "business analysis, management, management consulting and public relations services" under § 12-407(2)(i)(J), but only when the service relates to the recipient's core business or its human-resource management — and the regulation carves out a professional-services exception. Services are not taxable under (J) when they are "professional services … rendered by a member of a profession, acting in such member's professional capacity, and … commonly associated with such profession," where a "profession" is any generally acknowledged occupation requiring a degree, license, or specialized training (Conn. Agencies Regs. § 12-407(2)(i)(J)-1(c)(3)).

DRS worked through the three-part test and found all three met:

• A profession? Yes. Pharmacy requires licensure and education under Chapter 382 of the General Statutes, so it is a "generally acknowledged professional occupation requiring a degree, license or specialized training."
• In his professional capacity? Yes. Reviewing drug appropriateness, dosages, and regimens, and monitoring and observing patients, all fall squarely within the statutory "practice of pharmacy" (§ 20-184a).
• Commonly associated with the profession? Yes — even for the in-service training. Federal rules (42 C.F.R. § 483.60) and Connecticut's own Guidelines for Pharmaceutical Consulting in Long-Term Health Care Facilities (¶ 4.00) treat routine in-service education of facility staff as part of a consultant pharmacist's job.

Because the professional-services exception applied to the entire package, none of the pharmacist's consultation services were taxable business-management services.

What this means for you

Licensed pharmacists consulting to facilities

If you consult to nursing homes or similar facilities and your work is the practice of pharmacy — reviewing drug regimens, monitoring patients, and the staff training that comes with the role — Connecticut's business-management-services tax generally does not reach it. The key is that a licensed professional is doing professional work commonly associated with the license.

Nursing homes and other health-care buyers

You generally should not be charged Connecticut sales tax on a consultant pharmacist's professional services, including the in-service education they provide your staff. If a vendor charges tax on genuinely professional pharmacy consulting, that's worth questioning.

Other licensed professionals

The same three-part test applies to any licensed or degreed profession (the regulation lists medical, legal, accounting, and actuarial as examples, "including but not limited to"). Work that would otherwise look like taxable management consulting can fall outside the tax when a professional performs it in their professional capacity. The companion Ruling 94-21 applied this exact analysis to a chemist consulting for a hair-products manufacturer and reached the same "not taxable" result.

Accountants and tax professionals

Watch the boundary. The exception protects professional services in the professional's capacity; it does not convert every service a professional's firm sells into an exempt one. Non-professional management or PR work touching a client's core business can still be taxable. DRS said this Ruling clarifies Ruling No. 92-14 and Policy Statement 92(2.1), and it was later cited in Ruling 97-1.

Common questions

Q: Does Connecticut sales tax apply to a consultant pharmacist's services to a nursing home?
A: Not here. Because pharmacy is a licensed profession and the pharmacist rendered the services in that professional capacity, the professional-services exception took the work out of the taxable "business-management services" category.

Q: What about the staff training the pharmacist provided — isn't training taxable?
A: DRS treated the in-service training as part of the practice of pharmacy, because federal rules and Connecticut's pharmaceutical guidelines make routine staff education part of a consultant pharmacist's role. So it too was exempt professional service, not taxable personnel training.

Q: Would this be taxable if a non-pharmacist did the same consulting?
A: Potentially. The exception depends on a member of a profession acting in a professional capacity. Similar advice to a service recipient's core business, delivered by someone outside a recognized profession, can be taxable business-management services.

Q: Can my facility rely on this ruling?
A: Not as your own. A DRS Ruling binds the Department only for the taxpayer and facts it addressed. It shows how DRS reasons, but your facts may differ — and DRS can later supersede or obsolete a ruling.

Citations and references

Statutes and regulations:

• Conn. Gen. Stat. § 12-407(2)(i)(J) (tax on business analysis, management, management consulting and public relations services)
• Conn. Agencies Regs. § 12-407(2)(i)(J)-1 (business-management-services regulation); -1(h) (core business), -1(i) (human resource management / job-related training), -1(c)(3) (professional-services exception)
• Conn. Gen. Stat. § 20-170; Chapter 382, § 20-163 et seq. (pharmacist licensure); § 20-184a ("practice of pharmacy")
• 42 C.F.R. § 483.60; Conn. Agencies Regs. § 19-13-D8v (nursing facilities must obtain a licensed pharmacist's services)

Related guidance (described in prose, not linked):

• Ruling No. 92-14 and Policy Statement 92(2.1) (clarified by this Ruling)
• Ruling 94-21 (companion — chemist; amplifies this Ruling) and Ruling 97-1 (cites this Ruling)
• Guidelines for Pharmaceutical Consulting in Connecticut's Long-Term Health Care Facilities, ¶ 4.00 (Pharmacy Advisory Committee, Conn. Dept. of Health Services)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 94-12

Original ruling text

Ruling 94-12, Sales and Use Taxes / Pharmacy Consultation Services / Business Management and Management Consulting Services / Personnel Training

This Ruling is amplified by Ruling 94-21   and cited in Ruling 97-1

FACTS:

A person licensed to practice pharmacy under Conn. Gen. Stat. § 20-170 and the regulations thereunder ("the Pharmacist") renders "pharmacy consultation services" to skilled and intermediate care nursing facilities. Such services include providing a monthly review of the appropriateness of the drug requirements for patients in the facility; reviewing patients' drug dosages; assessing patients' drug regimens; monitoring patients' vital signs; observing patients; and providing in-service training of nursing home personnel.

ISSUES:

Whether the Pharmacist's pharmacy consultation services are taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. §12-407(2)(i)(J) and Conn. Agencies Regs. §12-407(2)(i)(J)-1.

DISCUSSION:

Conn. Gen. Stat. §12-407(2)(i)(J) imposes sales and use taxes on "business analysis, management, management consulting and public relations services" ("business management services"). Conn. Agencies Regs. §12-407(2)(i)(J)-1 provides that to be taxable, business management services must relate to the service recipient's "core business" or "human resource management activities."

"The term 'core business activities' means and includes activities directly related to a service recipient's lines of business involving sales of products, property, goods or services to others..." Conn. Agencies Regs. §12-407(2)(i)(J)-1(h) (emphasis added). "The term 'human resource management activities' means and includes activities relating to (1) the hiring, development, job-related training , compensation and management of personnel..." Conn. Agencies Regs. §12-407(2)(i)(J)-1(i) (emphasis added). However, Conn. Gen. Stat. §12-407(2)(i)(J) does not apply where:

the services rendered are professional services that are rendered by a member of a profession, acting in such member's professional capacity, and that are commonly associated with such profession. The term 'profession' means any generally acknowledged professional occupation requiring a degree, license or specialized training, including, but not limited to, the medical, legal, accounting and actuarial professions...

Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3).

Whether the professional services exception contained in Conn. Gen. Regs. § 12-407(2)(i)(J)-1 applies to the Pharmacist's services turns on whether the Pharmacist is a member of a "profession," whether the services rendered by the Pharmacist are rendered in his professional capacity, and whether the services rendered by the Pharmacist are commonly associated with his profession.

The licensure and education requirements of Chapter 382 of the General Statutes (Conn. Gen. Stat. § 20-163 et seq.) and the regulations thereunder establish that the practice of pharmacy is a "generally acknowledged professional occupation requiring a degree, license or specialized training." Thus, with respect to the first issue, the Pharmacist is a member of a "profession" within the meaning of Conn. Agencies Regs. § 12-407(2)(i)(J)-1(c)(3).

The "'practice of pharmacy' means the sum total of knowledge, understanding, judgments, procedures, securities, controls and ethics used by a licensed pharmacist to assure optimal safety and accuracy in the compounding, distributing, dispensing and use of drugs, dangerous drugs and poisons." Conn. Gen. Stat. § 20-184a.

The Pharmacist's services of providing a monthly review of the appropriateness of the drug requirement for patients in the facility, reviewing patients' drug dosage, assessing patients' drug regimens, monitoring patients' vital signs, and observing patients fall within the ambit of the "practice of pharmacy" as that term is defined in Conn. Gen. Stat. § 20-184a. Therefore such services are rendered in the Pharmacist's professional capacity.

Less obvious is whether the Pharmacist's service of providing in-service training of nursing facility personnel is a service that is both "rendered in the pharmacist's professional capacity" and "commonly associated with his profession."

The Pharmacist conducts in-service training programs that are tailored to meet the specific needs of the facility. Such programs address drug therapies, the effects of drugs on patients, and all aspects of a pharmaceutical program in a long-term care facility, including compliance with federal and state laws.

Federal regulations require skilled and intermediate care nursing facilities to provide pharmaceutical services to meet the needs of each resident and to employ or obtain the services of a licensed pharmacist. 42 C.F.R. § 483.60. See also Conn. Agencies Regs. §19-13-D8v.

Furthermore, Paragraph 4.00 of the Guidelines for Pharmaceutical Consulting in Connecticut's Long-Term Health Care Facilities (the "Pharmaceutical Guidelines"), prepared by the Pharmacy Advisory Committee of the Connecticut Department of Health Services, notes that

[as part of the standard for [nursing] staff development, federal regulations require the planning and implementation of an on-going educational program for the development and improvement of skills of all of the [nursing] facility's personnel, including but not restricted to training related to problems and needs of the aged, ill, and disabled. The [pharmacist] consultant has an opportunity to bring his/her expertise to the staff of the facility and affecting appropriate pharmacological utilization by routinely presenting in-service education programs at the facility [emphasis added].

Therefore, it can be inferred from the federal regulations and State Pharmaceutical Guidelines that in-service training programs are related to the "practice of pharmacy" and are rendered in the Pharmacist's professional capacity.

RULING:

The Pharmacist is a member of a "profession" within the meaning of Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3). The Pharmacist renders pharmacy consultation services in his professional capacity. Such pharmacy consultation services are commonly associated with the practice of pharmacy. Therefore, the professional services exception in Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3) applies and the Pharmacist's pharmacy consultation services are not taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. 12-407(2)(i)(J).

This Ruling clarifies Ruling No. 92-14 and Policy Statement 92(2.1).

LEGAL DIVISION

June 24, 1994