Ruling Request No. 92-06

Re: Request for Sales/Use Tax Ruling on Certain Sales of Pharmaceuticals

Facts

A certain company, is a provider of pharmaceuticals to nursing home patients. The company enters into contracts with nursing facilities to provide all pharmaceuticals needed by patients of the nursing facility. All pharmaceuticals (including proprietary medicines) that are sold by a certain company to nursing facility patients are prescribed by a physician.

Ruling Requested

All pharmaceuticals (including proprietary medicines) that are sold by the certain company to nursing facility patients under a physicians prescription will be exempt from Rhode Island sales and use taxes.

Discussion

R.I.G.L. 44-18-30 reads as follows:

44-18-30. Gross receipts exempt from sales and use taxes. -- There are exempted from the taxes imposed by this chapter the following gross receipts:

* * *

(K) Medicines and drugs. From the sale and from the storage, use, or other consumption in this state, subsequent to March 31, 1948, of medicines and drugs as defined in section 5-19-1, sold on prescriptions.

R.I.G.L. 5-19-1 reads in pertinent part:

5-19-1. Definitions.-- The terms "drugs" and "medicines and poisons", as used in this chapter shall mean and include all drugs and preparations sold under or by a name recognized in the United States pharmacopoeia or national formulary, and of the standards of strength, quality or purity as determined by the test, if any, laid down in the United States pharmacopoeia or national formulary; provided however, that the term "poison",...

R.I.G.L. 44-18-30(K) exempts medicines and drugs as defined in section 5-19-1 provided they are sold on prescription. R.I.G.L. 4-19-1 defines medicines and drugs as all drugs and preparations sold under or by a name recognized in the United States Pharmacopoeia or National Formulary and meets specific standards of strength, quality or purity as determined by the test (if any) set forth in the United States Pharmacopoeia or National Formulary. Medicines and drugs listed in the pharmacopoeia include not only prescription drugs normally sold through a pharmacist but proprietary or patent medicines sold over the counter.

Nursing homes and other health care facilities licensed by the Rhode Island Department of Health are not allowed to administer to its patients any drugs or proprietary medicines unless prescribed by a physician. Accordingly, nursing homes and other licensed health facilities are deemed to be the purchasers of prescription drugs and medicines when contracting with the company for all pharmaceuticals needed by patients of the licensed facilities.

Ruling

All pharmaceuticals (including proprietary medicines) sold by the company to nursing facility patients under a physician's prescription are exempt from Rhode Island sales and use taxes pursuant to 44-18-30(K).

The ruling may be relied upon by the company and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result or until the underlying factual presentation changes.

R. Gary Clark

Tax Administrator

August 18, 1992