Are sales of drugs to licensed practitioners (dentists, optometrists, veterinarians) exempt from Kansas sales tax?

Plain-English summary

The question was whether drugs sold to licensed practitioners — such as dentists, optometrists, and veterinarians — qualify for Kansas's prescription-drug sales-tax exemption.

The Department relied on K.S.A. 79-3606(q), which exempts the sale of drugs (as defined by K.S.A. 65-1626) that are dispensed pursuant to a prescription order by a licensed practitioner. Reading that provision, the Department concluded two things:

1. Sales to the practitioner are exempt. Drugs sold to a person licensed to practice the healing arts — expressly including dentistry, optometry, and veterinary medicine — for that person's inventory or for use in performing their professional services fall within the K.S.A. 79-3606(q) exemption and are exempt from Kansas state and local sales tax. The Department gave the example of a veterinarian buying drugs from a local Walgreens.
2. Drugs dispensed on that practitioner's prescription order are exempt. When a licensed healing-arts practitioner writes a prescription order, the drug dispensed on it is likewise exempt, so a customer taking that prescription to their pharmacy can purchase it tax-exempt.

What this means for you

Pharmacies and drug suppliers

You can sell drugs (as defined by K.S.A. 65-1626) tax-exempt to a licensed healing-arts practitioner for the practitioner's inventory or professional use, and you can fill a prescription order written by such a practitioner tax-exempt. Keep documentation showing the buyer's licensed status or the prescription order supporting the exempt sale.

Dentists, optometrists, and veterinarians

Drugs you buy for your inventory or to use in treating patients come within the exemption — you should not be charged Kansas sales or use tax on them.

Consumers filling prescriptions

A drug dispensed to you on a prescription order from a licensed practitioner is exempt from Kansas sales tax.

Common questions

Q: Are drugs sold to a veterinarian taxable in Kansas?
A: No. The Department held that drugs (as defined by K.S.A. 65-1626) sold to a licensed practitioner — including a veterinarian — for inventory or professional use are exempt under K.S.A. 79-3606(q).

Q: Do dentists and optometrists get the same treatment?
A: Yes. The ruling expressly lists dentistry, optometry, and veterinary medicine as within "the healing arts" for this exemption.

Q: Is the exemption limited to state sales tax?
A: No. The ruling says the exempt sales are exempt from Kansas state and local sales tax.

Q: What has to be true for the drug itself to qualify?
A: It must be a "drug" as defined by K.S.A. 65-1626 and, in the dispensing scenario, be dispensed pursuant to a prescription order by a licensed practitioner.

Q: Does this ruling apply to me?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows how the Department reads the prescription-drug exemption.

Citations and references

• K.S.A. 79-3606(q) — exempts the sale of drugs (as defined by K.S.A. 65-1626) dispensed pursuant to a prescription order by a licensed practitioner. The Department applied it to exempt both drugs sold to licensed healing-arts practitioners (for inventory or professional use) and drugs dispensed on such a practitioner's prescription order.
• K.S.A. 65-1626 — supplies the definitions of "drug" and "prescription order" used by the exemption.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2003-056

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 12, 2003

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Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated October 29, 2003, regarding the application of Kansas Retailers' Sales tax.

K.S.A. 79-3606(q) provides an exemption from the Kansas sales tax for the sale of drugs, as defined by K.S.A. 65-1626, dispensed pursuant to a prescription order, as defined by K.S.A. 65-1626, by a licensed practitioner.

The Kansas Department of Revenue has determined that sales of drugs, as defined by K.S.A. 65-1626, to a person licensed to practice the healing arts, to include dentistry, optometry, and veterinary medicine, for said person's inventory or for use in the performance of his or her professional services would fall within the exemption under K.S.A. 79-3606(q). Therefore, such sales of drugs to licensed practitioners would be exempt from Kansas state and local sales tax. This would include, but not be limited to, drugs that are purchased by a veterinarian from your local Walgreens.

Additionally, the provisions of K.S.A. 79-3606(q) would also exempt from sales tax the sale of drugs, as defined by K.S.A. 65-1626, when dispensed pursuant to a prescription order by a person licensed to practice the healing arts, to include dentistry, optometry and veterinary medicine. If your client takes this respective prescription order to their local Walgreens, the purchase could be made tax exempt.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 11/14/2003 Date Modified: 11/14/2003

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