Was injectable tuberculin antigen exempt from Virginia sales and use tax when a licensed medical practice bought it for professional use?

Subject

Taxpayer maintains that the injectable tuberculin antigen is exempt from the tax as are vaccines and other prescription drugs.

Plain-English summary

The injectable tuberculin antigen was exempt when bought for use by the licensed professionals identified in the practice's records. FDA guidance classified it as a prescription drug, and the Virginia Board of Pharmacy treated it as a Schedule VI controlled substance.

The Department distinguished the injectable antigen from the TB tine testing device addressed in P.D. 91-178. Because the earlier device used coated prongs rather than an injectable controlled drug, that ruling did not govern these purchases.

What this means for you

• Classification of the product mattered: the exemption applied to the injectable antigen, not automatically to every tuberculosis-testing item.
• The statutory exemption depended on purchase for use by a licensed physician, nurse practitioner, or physician assistant in professional practice.
• Documentation identifying the licensed purchaser supported removal of the purchases from the audit.
• The taxpayer received a refund of the paid tax and interest, plus refund interest from the payment date.

Common questions

Did the Department treat every TB test as exempt?

No. It distinguished the injectable antigen from a TB tine device previously held taxable.

Why did the exemption apply here?

The antigen was classified as a prescription drug and Schedule VI controlled substance, and the records identified a licensed physician as purchaser for professional use.

Citations and references

• Va. Code § 58.1-609.10(9).
• P.D. 91-178 (August 23, 1991), distinguished in the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-267

Original ruling text

December 16, 2010

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to * (the "Taxpayer"), for the period January 2004 through January 2009. It is noted that the Taxpayer has paid the assessment. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer operates a medical practice. The Taxpayer was audited and assessed tax on untaxed purchases of tangible personal property for use in its practice. At issue is the tax assessed on the Taxpayer's purchase of an injectable tuberculin antigen used to screen for tuberculosis. The auditor concluded that the tuberculin antigen is subject to the tax based on Public Document (P.D.) 91-178 (8/23/91). The Taxpayer maintains that the injectable tuberculin antigen is exempt from the tax as are vaccines and other prescription drugs.

DETERMINATION

Virginia Code § 58.1-609.10 9 provides an exemption from the retail sales and use tax for:

Medicines [and] drugs . . . dispensed by or solid on prescriptions or work orders of . . . licensed physicians . . . [and] controlled drugs purchased for use by a licensed physician, optometrist, licensed nurse practitioner, or licensed physician assistant in his professional practice, regardless of whether such practice is organized as a sole proprietorship, partnership, or professional corporation, or any other type of corporation in which the shareholders and operators are all licensed physicians, optometrists, licensed nurse practitioners, or licensed physician assistants engaged in the practice of medicine, optometry, or nursing; medicines and drugs purchased for use or consumption by a licensed hospital, nursing home, clinic, or similar corporation not otherwise exempt under this section . . . . "

In P.D. 91-178, the Tax Commissioner ruled that "TB Tine" and TB Tine Test" are primarily devices for testing and not considered exempt drugs. Thus, the taxpayer was subject to the tax on such purchases.

Based on Food and Drug Administration (the "FDA") guidelines reviewed by the Department, the injectable tuberculin antigen at issue is classified by the FDA as a prescription drug. The Virginia Board of Pharmacy concurs with the federal classification and deems the injectable tuberculin antigen as a Schedule VI controlled substance under the Virginia Drug Control Act. The TB tine test is a device with four tines or prongs attached to a handle and coated with tuberculin, unlike the tuberculin antigen that is injectable. For this reason, P.D. 91-178 is not applicable in this instance.

Based on the above information and the requirements set forth in the statute, the injectable tuberculin antigen qualifies for exemption under Va. Code § 58.1-609.10 9 as a controlled drug when purchased for use by a licensed physician, licensed nurse practitioner, or licensed physician assistant in the Taxpayer's professional practice. In this instance, the documentation provided by the Taxpayer identifies a licensed physician as the purchaser of the controlled drugs. Therefore, the audit will be revised to remove the contested purchases.

CONCLUSION

In accordance with this determination, the Taxpayer is entitled to a refund of the tax and interest paid on the purchases of the injectable tuberculin antigen. The refund will be issued shortly and will include refund interest from the date of payment.

The Code of Virginia section and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-3816408908.T