Were Pedialyte sales nontaxable only through pharmacies with physician-dispensing records, or also when consumers bought it from grocery stores?

Plain-English summary

Assistant chief counsel directed staff to remove Pedialyte from an earlier annotation and create a new annotation stating simply that its sales were nontaxable.

The memorandum treated Pedialyte as medicine used to treat illness in children. Although consumers could buy it from grocery stores and other general retail sources, not only pharmacies, the transaction remained nontaxable.

The usual availability of records showing that property was dispensed under a physician's direction did not control. Tax treatment was not supposed to depend on whether the consumer chose a pharmacy or grocery store.

Common questions

Were grocery-store sales of Pedialyte taxable?

No. The memorandum said tax did not apply whether the product was bought from a pharmacy or grocery store.

Why did counsel classify it as nontaxable?

The source says Pedialyte was a medicine used to treat illness in children.

Were physician-dispensing records required?

No. Counsel directed that Pedialyte be treated as nontaxable without that documentation.

Citations and references

• Business Taxes Law Guide Annotation 245.1265 (historical annotation directed to be edited)
• Deputy Director Glenn A. Bystrom's May 22, 1996 memorandum requesting comment on Pedialyte under Annotation 245.1265 — memorandum referenced but not reproduced in the official PDF
• Medical Oxygen comparison for a medical product available outside pharmacies or health facilities — comparison supplied without an annotation number, opinion, product evidence, or other supporting record in the official PDF
• Pedialyte facts concerning treatment of childhood illness, general-consumer availability, pharmacy and grocery-store sales, and absence of ordinary physician-direction dispensing records — facts supplied; complete formulation, ingredients, label, directions, package, medical evidence, prescriptions, invoices, and sales records not reproduced in the official PDF
• Official Annotation 245.1630 implementing the directed short statement that Pedialyte sales are nontaxable and dating it May 29, 1996 — current annotation supplies no further rationale or implementation record
• Possible later product sale, label or formulation change, audit, assessment, refund claim, appeal, or other agency action — no follow-up or final outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/245-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/245-1630.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82
Telephone: 445-3723

Memorandum
To :

Mr. Glenn A. Bystrom
Deputy Director
Sales and Use Tax Department
MIC:43

From :

Gary J. Jugum
Assistant Chief Counsel

Subject:

Pedialyte

245.1630
Date:

May 29, 1996

This is in response to your memorandum of May 22, 1996. You have asked that we comment upon Business Taxes Law Guide Annotation 245.1265, with respect to the product “Pedialyte.” The annotation should be edited to remove all reference to the product Pedialyte. A new annotation should be prepared based on this letter to confirm the fact that tax does not apply to sales of Pedialyte. The new annotation should state merely as follows: Sales of Pedialyte are nontaxable. It should be included in the food product section, as well as the medicines section of the annotations. Pedialyte is nontaxable because it is a medicine used to treat illness in children. This product is available from general consumer sources, and distribution is not limited to pharmacies. This product is like “Medical Oxygen,” which is likewise available from sources other than pharmacies or health facilities. Because this product is available from sources that do not ordinarily maintain a record of property dispensed consistent with the direction of a physician, we should treat the sale transaction as nontaxable without regard to such documentation. In the case of this product, application of the tax should not depend on the decision made by the consumer with regard to the vendor. Tax will not apply whether the product is purchased from a pharmacy or from a grocery store.

GJJ:sr
cc:

Mr. Dennis Fox