Are injectable medications and injectable biologics exempt from South Carolina sales and use tax (per SC IL #14-4)?

Plain-English summary

Injectable medications and injectable biologics are exempt from South Carolina's state and local sales and use tax under S.C. Code § 12-36-2120(80) — but the exemption phased in, reaching 100% on July 1, 2015. The provision was added in 2012 to phase in the exemption.

To qualify, the injectable medication or biologic must be administered by or under the supervision of a physician in an office that is under a physician's supervision, or in a Center for Medicare or Medicaid Services certified kidney dialysis facility. For this exemption, "biologics" are products applicable to preventing, treating, or curing a human disease or condition that are produced using living organisms, materials derived from them, or cellular, subcellular, or molecular components of living organisms.

The phase-in. On February 19, 2014 the Board of Economic Advisors notified the Department that the conditions to implement the exemption had been met. As a result:

• July 1, 2014 - June 30, 2015: 50% of the gross proceeds of qualifying sales or purchases are exempt from state and local sales and use tax.
• On or after July 1, 2015: qualifying sales or purchases are fully exempt.

How to claim it. On the Sales and Use Tax Return (ST-3), report qualifying sales or purchases on the worksheet under the "Allowable Deductions" section. The taxable gross proceeds remaining after all deductions are subject to both the state tax and any applicable local tax.

What this means for you

If you are a physician's office or dialysis facility

Injectable medications and biologics administered by or under a physician's supervision (or at a CMS-certified kidney dialysis facility) qualify. For the July 1, 2014 - June 30, 2015 window only 50% of the proceeds were exempt; from July 1, 2015 the qualifying sales are fully exempt. Claim the deduction on the ST-3 worksheet.

If you are a supplier or biologics vendor

Track which sales meet the administration and facility conditions, apply the correct exempt percentage for the period, and document the deduction; anything not qualifying stays subject to state and local tax.

Common questions

Q: What is exempt?
A: Injectable medications and injectable biologics administered by or under a physician's supervision in a physician-supervised office, or in a CMS-certified kidney dialysis facility.

Q: How much is exempt and when?
A: 50% of gross proceeds for July 1, 2014 - June 30, 2015; fully exempt on or after July 1, 2015.

Q: How do I claim it?
A: Report qualifying sales on the ST-3 worksheet under "Allowable Deductions"; remaining taxable proceeds are subject to state and any local tax.

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL14-4.pdf

Original ruling text

State of South Carolina

Department of Revenue
300A Outlet Pointe Blvd., P.O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org
SC INFORMATION LETTER #14-4
SUBJECT:

Injectable Medications and Injectable Biologics – Exemption
(Sales and Use Tax)

EFFECTIVE DATE: July 1, 2014
SUPERSEDES:

SC Information Letter #13-9

REFERENCES:

Code Section 12-36-2120(80) (2014)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2014)
S. C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no
precedential value.

Code Section 12-36-2120(80) was added in 2012 to phase-in an exemption for injectable
medications and injectable biologics. The injectable medication or injectable biologic must be
administered by or pursuant to the supervision of a physician in an office which is under the
supervision of a physician, or in a Center for Medicare or Medicaid Services certified kidney
dialysis facility. For purposes of this exemption, “biologics” means the products that are
applicable to the prevention, treatment, or cure of a disease or condition of human beings and
that are produced using living organisms, materials derived from living organisms, or cellular,
subcellular, or molecular components of living organisms.
On February 19, 2014, the Board of Economic Advisors notified the Department that the
requirements have been met to implement this exemption. Accordingly, for July 1, 2014 - June
30, 2015, 50% of the gross proceeds of sales of qualifying sales or purchases are exempt from
the State and local sales and use taxes. On or after July 1, 2015, qualifying sales or purchases are
fully exempt from the State and local sales and use taxes.
When completing the Sales and Use Tax Return (ST-3), a taxpayer will reflect sales or purchases
qualifying for this exemption on “the worksheet” under the “Allowable Deductions” section. The
taxable gross proceeds after all deductions will be subject to both the State and applicable local
sales and use taxes.