A network marketing company sells a specific list of vitamin/mineral/supplement products with no NDC number, some marketed for athletes, seniors, or even pets. Are all of these exempt as over-the-counter drugs and medicines under the April 1, 2000 exemption?

Plain-English summary

A network marketing company that sells vitamins and minerals (some manufactured at its own out-of-state plant, some purchased) — through preferred customers, associates, and independent distributors in Texas — asked the Comptroller to rule on a specific list of twelve named products, none of which carry an NDC (National Drug Code) number: Mega Antioxidant Chelated Mineral, Body Rox, Usanimals, CoQuinone, E-Prime, Poly C, Iron 28, ActiCal, Proflavanol, OptOmega, BiOmega-3, and Procosamine.

The Comptroller confirmed all of them qualify for the new April 1, 2000 over-the-counter drugs and medicines exemption. To qualify, a product must be a "drug or medicine" — an article or substance intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or suffering. No NDC number is required. Retailers, including direct sales organizations like this one, no longer need to collect sales tax on vitamins, minerals, and dietary food supplements — herbal dietary supplements for weight loss or other medicinal purposes are a specific example given.

One product-specific nuance: Procosamine is marketed for athletes, seniors, and pets — but since it's still a human-usable product in this fact pattern, it remains exempt as an over-the-counter drug and medicine. The letter draws a firm separate line, though: the new exemption law does not cover drugs or medicines made or marketed specifically for animals. Animal drugs/medicines stay taxable unless prescribed (sold or dispensed) by a licensed veterinarian.

What this means for you

Network marketing / direct sales companies selling vitamins and supplements

You don't need an NDC number on any of your vitamin, mineral, or dietary supplement products to claim the OTC drugs/medicines exemption for human use — as confirmed across a real list of twelve specific products in this letter. But if any product line is made or marketed specifically for pets or other animals, that product stays taxable unless a licensed veterinarian prescribes/dispenses it — don't lump animal products in with your human supplement line for tax purposes.

Companies selling multi-use products (marketed to both humans and pets)

Watch the "marketed for" distinction carefully — a product recommended broadly (like Procosamine, marketed here to athletes, seniors, and pets) can stay exempt as long as it's genuinely a human product; but a product specifically made/marketed for animal use falls outside this exemption entirely.

Accountants and tax professionals

Useful precedent confirming (a) no NDC number is required for the human OTC/supplement exemption, and (b) the animal-drug carve-out is about the product's marketing/intended use, not merely whether some customers happen to be pet owners.

Common questions

Q: Do my vitamin and supplement products need an NDC number to be tax-exempt in Texas?
A: No. None of the twelve products addressed in this letter had an NDC number, and all were still ruled exempt.

Q: What makes a product a "drug or medicine" for this exemption?
A: An article or substance intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or suffering.

Q: Is a product marketed to both people and pets exempt?
A: If it's genuinely a human product (like Procosamine here, marketed to athletes and seniors as well as pets), it can still qualify as exempt. But products made or marketed specifically for animals are not covered by this exemption.

Q: Are pet medicines exempt under this law?
A: No. Drugs or medicines for animals remain taxable unless prescribed (sold or dispensed) by a licensed veterinarian.

Q: Can I rely on this letter for my own product line?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

No Texas Tax Code section or administrative rule is cited by number in the original 2000 letter. The published version carries a later editorial reference to HB 3319 (effective 9/1/2007, drug fact panel requirement).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200004188L

Original ruling text

ALERT: Over the Counter (OTC) sales are now required to have a drug fact panel to qualify for exemption effective 09/01/2007-HB 3319.

April 12, 2000

Dear **:

Thank you for your letter concerning the recent change in the Texas sales tax
law exempting over-the-counter drugs and medicines.

Question: COMPANY A is a Network Marketing Company that sells products
directly to preferred customers, associates and through independent
distributors in the State of Texas. Some of the products that you sell are
vitamins and minerals that are manufactured in your plant located at
**, Utah or are purchased. With the new law exempting
over-the-counter drugs and medicines that has a National Drug Code (NDC) from
sales tax, you would like a ruling on your products to see if they are tax
exempt under this new law.
The vitamins and minerals that you sell do not have a NDC number. You asked
about the following products:

Mega AntioxidantChelated Mineral
Body Rox
Usanimals
CoQuinone
E-Prime
Poly C
Iron 28
ActiCal
Proflavanol
OptOmega
BiOmega-3
Procosamine

Response: Effective April 1, 2000, sales of over-the-counter drugs and
medicines are exempt. To qualify for this exemption, a product must be a drug
or medicine, which is an article or substance intended for use in the
diagnosis, cure, mitigation, treatment, or prevention of disease or suffering.
A copy of the bulletin explaining the exemption of over-the-counter drugs and
medicines is enclosed.

Retailers (including direct sales organizations such as COMPANY A) are no
longer required to collect sales tax on sales of vitamins, minerals, and
dietary food supplements. As an example, herbal dietary supplements taken for
weight loss or for other medicinal purposes are exempt. All of the products
you forwarded are vitamins, minerals or dietary supplements taken by humans and
are exempt if purchased on or after April 1, 2000.

Although Procosamine is recommended for athletes, seniors, and pets, it is
still exempt as an over-the-counter drug and medicine. If you make products
specifically for pets, please be aware the new law did not exempt drugs or
medicines for animals. Drugs or medicines for animals are taxable unless
prescribed (sold or dispensed) by a licensed veterinarian.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division