Did a prescription polidocanol injection used to treat varicose veins qualify for Illinois's lower drug tax rate?

Plain-English summary

The Department gave the lower-rate rule for prescription drugs but did not expressly state a final product-specific conclusion for the polidocanol injection. The product was FDA approved, labeled “Rx Only,” and intended for injection to treat spider and varicose veins.

Under the rule described, a medicine or drug was a preparation for human use whose label claimed it would cure or treat disease, illness, injury, or pain, or mitigate symptoms. Prescription drugs and qualifying nonprescription medicines were examples eligible for the lower State rate stated in the letter.

Nonprescription grooming and hygiene products—such as shampoo, toothpaste, mouthwash, antiperspirant, and sunscreen—used the general rate regardless of medicinal claims unless available by prescription only.

What this means for you

Preserve FDA status, prescription restrictions, approved labeling, intended human use, and exact medicinal claims. Treat the numerical rates as historical and verify current State and local treatment.

Common questions

Q: Did the product facts fit the drug definition supplied?
A: They appear to, but the GIL did not expressly issue a final product classification.

Q: Did cosmetic benefit automatically make the product a grooming product?
A: The GIL did not say that; it focused on prescription status and medicinal label claims.

Q: Are the rates current?
A: No current-rate conclusion is provided here.

Subject

Drugs

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0106.pdf

Original ruling text

ST 10-0106-GIL 11/05/2010 DRUGS
This letter concerns the low 1% State rate of tax applicable to drugs, medicines and medical
appliances. See, 86 Ill. Adm. Code 130.311. (This is a GIL.)

November 5, 2010

Dear Xxxxx:
This letter is in response to your letter dated June 14, 2010, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
PURPOSE:
COMPANY is seeking an interpretation of how Illinois Tax Law will apply to a new
product it will be selling: PRODUCT.
FACTS:
COMPANY is a medical device and pharmaceutical company, headquartered in
CITY/STATE, with a manufacturing facility in CITY/STATE2.
COMPANY will be selling a new product that recently received FDA/NDA approval. The
product’s marketing name will be PRODUCT. The active ingredient is Polidocanol,
which is recognized in the US Pharmacopoeia. PRODUCT is a controlled drug that is
required to be labeled with ‘Rx Only’ on the packaging (copy of packaging attached).
Below is a statement of facts related to PRODUCT:
Veins channel oxygen-depleted blood back toward the heart through oneway valves. If the valves of the veins do not function well, blood does not
flow efficiently. The veins become enlarged because they are congested
with blood. These enlarged veins are commonly called spider veins or
varicose veins. Spider veins are small red, blue or purple veins on the

surface of the skin. Varicose veins are larger distended veins that are
located somewhat deeper than spider veins. There are several adverse
consequences of untreated varicose veins, and their severity will vary from
person to person depending on the circumstances.
Sclerotherapy is a common treatment for small (spider) and medium size
(reticular) veins. A tiny needle is used to inject the veins with a solution
(called a sclerosant) that irritates the lining of the vein. In response, the
veins collapse and are reabsorbed. The surface veins are no longer
visible. Depending on the size and location of the veins, different types
and strengths of sclerosants are used. With this procedure, veins can be
dealt with at an early stage, helping to prevent further complications
including surgical removal of veins.
Polidocanol is a well recognized worldwide standard of care for venous
sclerotherapy.
Such treatment is typically performed by vascular
surgeons, phlebologists, and dermatologists. Polidocanol was recently
approved by FDA for use in the U.S. as a treatment for varicose veins.
The product is classified as a prescription pharmaceutical by the
FDA. The trade name for this product in the United States is PRODUCT.
Discussion:
COMPANY believes that PRODUCT should qualify for the reduced rate of Retailers'
Occupation Tax of 1%, plus applicable local taxes, as a drug or medicine because it is
classified as a prescription pharmaceutical by the FDA and is intended to be used to
treat small (spider) and medium (reticular) veins. It is also intended to eliminate veins
that no longer function properly. Although sclerotherapy has the benefit of improving
aesthetic appearance, its medical uses and ingredients should deem PRODUCT to be
considered a drug or medicine and to not be cosmetic in nature. Furthermore,
PRODUCT is sold only on prescription and sold directly to physicians, hospitals and
medical clinics for their use with their patients.
Under 86 Ill. Adm. Code 130.310, drugs and medicines are subject to the reduced tax
rate of 1%, plus applicable local taxes, if they are for human use and purport on the
label to have medicinal qualities.
PRODUCT is classified as a prescription pharmaceutical by the FDA. If the valves of
veins don’t function well, blood doesn’t flow efficiently. For these small and medium
size red, blue or purple veins on the surface of the skin that no longer function properly,
polidocanol is used in sclerotherapy treatment to eliminate the veins. With this
procedure, veins can be dealt with at an early stage, helping to prevent further
complications including surgical removal of veins. Therefore, polidocanol should be
considered a drug and subject to the reduced tax rate of 1%, plus applicable local taxes.
COMPANY respectfully requests for the Illinois Department of Revenue to confirm these
conclusions for this newly approved controlled drug or to provide any other guidance as
appropriate.
If you have any questions or concerns, please contact INDIVIDUAL.

DEPARTMENT’S RESPONSE:
Although we cannot give you a specific answer in the form of a General Information Letter, we
hope you find the following helpful.
Please see the Department’s regulation at 86 Ill. Adm. Code Section 130.311, which is its
regulations governing Drugs, Medicines, Medical Appliances, and Grooming and Hygiene Products.
Those products that qualify as food, drugs, medicines and medical appliances are taxed at a lower
State rate of 1% plus any applicable local taxes. Those items that do not qualify for the low rate of tax
are taxed at the general merchandise rate of 6.25% plus applicable local taxes.
A medicine or drug is any pill, powder, potion, salve, or other preparation for human use that
purports on the label to have medicinal qualities. A written claim on the label that a product is
intended to cure or treat disease, illness, injury or pain, or to mitigate the symptoms of such disease,
illness, injury or pain constitutes a medicinal claim. See Section 130.311 for examples of medicinal
claims. Examples of qualifying products include prescription drugs or medicines and nonprescription
drugs or medicines such as aspirin or other pain relievers that purport on the label to have medicinal
qualities. Beginning on September 1, 2009, the term "nonprescription medicines and drugs" does not
include grooming and hygiene products. Grooming and hygiene products include, but are not limited
to, soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and sun tan
lotions and screens, unless those products are available by prescription only. If an item is a
nonprescription grooming and hygiene product, it will be taxed at the State 6.25% general
merchandise rate regardless of any medicinal claims made on the product’s label.
A medical appliance is an item that is intended by its manufacturer for use in directly
substituting for a malfunctioning part of the human body. Included in the exemption as medical
appliances are such items as artificial limbs, dental prostheses and orthodontic braces, crutches and
orthopedic braces, wheelchairs, heart pacemakers, and dialysis machines (including the dialyzer).
Corrective medical appliances such as hearing aids, eyeglasses and contact lenses qualify for
exemption.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk