Does a public school district have to charge sales tax on medications its veterinary-program teacher sells to staff members as part of a student veterinary curriculum?

Subject

Taxability of Veterinary Services in School Program

Plain-English summary

The Missouri Department of Revenue ruled that a public school district's sales of medication through a new high school veterinary program are NOT subject to sales tax.

Applicant is a school district launching a veterinary medicine curriculum at its high school. A veterinarian serves as the teacher, and the program offers staff members' pets vaccinations and physicals for a fee, with that fee rolled back into the program. Students learn to administer vaccinations and perform physicals. The program also plans to offer preventative medications, such as heartworm and flea/tick treatments -- the veterinarian-teacher orders the medications and sells them to staff members, with all profits from those medication sales rolled back into the program.

Section 144.020.1, RSMo, imposes sales tax on retail sales of tangible personal property. But Section 144.030.2(19), RSMo, exempts "all sales made by or to all elementary and secondary schools operated at public expense in their educational functions and activities." Because Applicant is a public school district providing primary and secondary education, and the veterinary program is part of its high school curriculum, the Department found the medication sales fall within Applicant's educational functions and activities. Since the profits are rolled back into the program rather than kept for other purposes, the sales qualify for the exemption and are not subject to sales tax.

What this means for you

Public school districts running similar hands-on programs

If your school district operates a curriculum-based program where students or staff purchase goods or services connected to instruction (here, medication sold through a student-run veterinary class), and any profits are rolled back into the program rather than diverted elsewhere, this ruling suggests those sales can fall within the Section 144.030.2(19), RSMo, exemption for sales made by or to public elementary and secondary schools in their educational functions and activities. The key facts the Department relied on were that the program was part of the curriculum and that proceeds stayed within the program.

Accountants and tax professionals advising school districts

When evaluating whether a school-related sale qualifies for the public-school exemption, confirm two things mirrored in this ruling: (1) the activity is genuinely tied to the school's educational functions (here, a credentialed teacher running a curricular program), and (2) any profits are reinvested in the program rather than used for unrelated purposes. This ruling only addressed sales of medication by the school program to staff members -- it did not address sales to the general public or non-educational fundraising activities, so don't extend its reasoning beyond programs with comparable facts.

Veterinarians or other professionals partnering with schools on similar curricula

If you are a veterinarian or other licensed professional serving as a teacher in a school-run program that sells goods or services to raise money for the program itself, this ruling is a useful data point that such sales may not require sales tax collection -- but it is specific to this Applicant's facts and binds the Department only as to this Applicant, so any other program should seek its own guidance before assuming the same tax treatment applies.

Common questions

Q: Does the school district need to charge sales tax on the medications sold through the veterinary program?
A: No. The Department ruled that Applicant's sales of medication through the school's veterinary program are not subject to sales tax.

Q: Why are these medication sales exempt?
A: Because Applicant is a public school district, the veterinary program is part of its high school educational curriculum, and the profits from medication sales are rolled back into the program -- bringing the sales within the Section 144.030.2(19), RSMo, exemption for sales made by or to public elementary and secondary schools in their educational functions and activities.

Q: What if the program kept the profits instead of reinvesting them in the program?
A: The ruling doesn't address that scenario directly, but it specifically ties its conclusion to the fact that profits are rolled back into the program as part of Applicant's educational functions and activities -- any change in the facts as presented would render the ruling inapplicable.

Q: Who is buying these vaccinations, physicals, and medications?
A: Staff members' pets receive the vaccinations and physicals (performed under instruction as part of the curriculum), and staff members purchase the preventative medications (such as heartworm and flea/tick treatments) that the veterinarian-teacher orders for the program.

Q: Does this ruling cover sales tax on the veterinary services themselves, or just the medications?
A: The ISSUE and RESPONSE in the ruling are framed specifically around "Applicant's sales of medication through the school's program" -- that is the sale the Department addressed and found exempt.

Q: Can another school district rely on this ruling for its own program?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and underlying law remain unchanged. Another district should confirm its own program matches these facts and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8212

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated August 16, 2022.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a school district offering a new curriculum in their high school regarding veterinary medicine. The teacher will be a veterinarian and they will offer staff members' pets vaccinations/physicals for a fee. This fee will be rolled back into the program. The vet services will teach students how to administer vaccinations and perform physicals.  They also wish to offer preventative medications such as heartworm and flea/tick. The veterinarian/teacher will order the medications and will sell them to the staff members. All profits from the sales of medication will be rolled back into the program.

ISSUE :

Are Applicant's sales of medication through the school's program subject to sales tax?

RESPONSE :

No. Applicant's sales of medication through the school's veterinary program are not subject to sales tax.

Section 144.020.1, RSMo, imposes a sales tax on retail sales of tangible personal property. Section 144.030.2(19), RSMo, exempts from sales tax "all sales made by or to all elementary and secondary schools operated at public expense in their educational functions and activities."

Applicant is a public school district providing primary and secondary education. The veterinary program being created for the high school curriculum is within Applicant's educational functions and activities. Since the profits of the veterinarian's sales of medication to staff members are rolled back into the program, these sales are a part of Applicant's educational functions and activities, and exempt from sales tax.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford