Could California tax audit staff inspect and record patient and medication information from pharmacy prescriptions?

Plain-English summary

During a redacted pharmacy audit, a Board auditor sought to record patient names and prescribed medications from filled prescriptions; the advice request also identified patient addresses. The stated purpose was to determine whether medicine sales qualified for the Revenue and Taxation Code section 6369 exemption.

The pharmacy's representative refused and argued that the information was confidential among patient, doctor and pharmacist. The representative requested a letter from the State Board of Pharmacy, Attorney General, or Auditor General stating what information the auditor could take.

The opinion concluded that the pharmacy had to provide the information. It treated the Board as both a duly constituted authority under Business and Professions Code section 4331 and a person duly authorized by law under historical Regulation 1764 because statutes independently authorized the Board to examine taxpayer and third-party records.

The letter also identified two safeguards and consequences. Section 4331 required filled prescriptions to remain available for inspection for at least three years and made willful failure a misdemeanor; section 7151 made refusal to furnish Board-required data a misdemeanor. Government Code section 15619(a) and Revenue and Taxation Code section 7056 required information obtained from taxpayer records to remain confidential, subject to exceptions the letter called irrelevant there.

Live annotation and source posture

The current live annotation preserves the three-year retention language, section 15618 authority, and conclusion that Board staff may review prescription records for sales-and-use-tax compliance. It does not identify the requested patient names, addresses and medications, the exemption under review, the pharmacy's refusal, Regulation 1764, section 7054 authority, the two misdemeanor provisions, or the statutory confidentiality duties after access.

The Tax Counsel letter says its author discussed the issue with a redacted State Board of Pharmacy contact but expressly disclaims giving a written opinion on that agency's behalf. The source includes no separate Pharmacy Board, Attorney General, or Auditor General opinion.

The July 5 and July 12 pharmacy letters and the auditor's July 22 memorandum are described but not included. No pharmacy, taxpayer, patient, doctor, pharmacist, prescription, address, medication, claimed exempt sale, sample methodology, written Board authorization, audit workpaper, adjustment, assessment, appeal, penalty or final audit outcome is supplied.

CDTFA's Annotated Legal Opinions collection says these documents are summarized as annotations and statutory law controls over an inconsistent annotation. The official two-page PDF has native text and one page-one letterhead image, so no OCR was required. Two fresh direct PDF downloads and two live-page downloads were byte-identical; duplicate default text extractions also matched.

What this means for you

An agency access right and a confidentiality duty can coexist. Under this historical opinion, the pharmacy had to permit the tax audit review, while the auditor could not freely disclose what was obtained. For current practice, verify subpoena or examination authority, minimum necessary data, professional-record rules, health-privacy law, secure handling, and the exact exemption test.

Common questions

Q: Could the pharmacy refuse because the prescription information was confidential?

A: The opinion said no. It concluded that the Board was within the authorized-government exceptions described in the cited pharmacy provisions.

Q: What information did the advice request cover?

A: Patient names and addresses and the medications prescribed.

Q: Why did the Board want the records?

A: To test whether the pharmacy's sales met the prescription-medicine exemption in Revenue and Taxation Code section 6369.

Q: Could audit staff disclose the information freely after receiving it?

A: No. The opinion specifically noted statutory confidentiality duties for information obtained by examining taxpayer records.

Q: Did the State Board of Pharmacy issue this opinion?

A: No. Tax Counsel noted a discussion with that agency but expressly declined to speak for it.

Missing evidence and references

• July 5 and July 12, 1985 pharmacy letters — described but absent
• July 22, 1985 auditor memorandum and enclosures — described but absent
• Pharmacy, taxpayer, patient, doctor and pharmacist identities — redacted
• Prescriptions, addresses, medications and exemption sample — absent
• Written audit authorization, workpapers and adjustment — absent
• Assessment, appeal, penalty and final audit outcome — not supplied

Verbatim support

From the official September 23, 1985 Tax Counsel letter:

Our opinion is that REDACTED TEXT is required by law to provide this information to the Board.

Our opinion is that the Board of Equalization is both a “duly constituted authority” and a “person duly authorized by law” within the meaning of Section 4331 and Regulation 1764, because the Board has independent statutory authority to examine the records of taxpayers and other persons to ensure compliance with Sales and Use Tax Law.

We note that it is a misdemeanor for any person to fail or refuse to furnish data required by the Board.

Also, the information which a Board auditor obtains by an examination of taxpayer’s records is required by law to be kept confidential, with certain exceptions not relevant here.

Citations and references

• California Business and Professions Code § 4331 — prescription retention and inspection provision quoted in the opinion
• Historical California Administrative Code, title 16, Regulation 1764 — pharmacy confidentiality rule quoted in the opinion
• California Government Code §§ 15618 and 15619(a) — Board examination authority and confidentiality provision cited in the opinion
• California Revenue and Taxation Code §§ 6369, 7054, 7056, and 7151 — medicine exemption, examination authority, confidentiality, and failure-to-furnish provisions cited in the opinion

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 425.0007
• Original supporting opinion: 425.0007 PDF

Original ruling text

425.0007

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-445-6493
September 23, 1985
Re:

REDACTED TEXT
Prescription records – audit examination

Dear Mr. REDACTED TEXT:
In his July 22, 1985 memorandum to the Board’s Legal Section Mr. Harry Rutta of the Board’s Culver City audit staff, enclosed your letters to him dated July 5, 1985, and July 12, 1985. Mr. Rutta has asked for our opinion on whether the Board is entitled to inspect and record, for its audit purposes, information from prescriptions filled by your client, REDACTED TEXT, including the names and addresses of the patients and the medications prescribed by the doctor. In summary, the facts are that during a Board audit of REDACTED TEXT, the auditor, REDACTED TEXT, sought to record a list of patients’ names and the medications prescribed by their doctors, taken from prescriptions filled by REDACTED TEXT pharmacy. The purpose was to determine if the sale of the prescription medicines qualified for the exemption from sales and use tax provided by Revenue and Taxation Code 6369. You have not permitted the auditor to record this information and contend the information is confidential among the patient, the doctor, and the pharmacist. You requested that our auditor get a letter from the State Board of Pharmacy, the Attorney General, or the Auditor General stating what information our auditor was entitled to take from the prescriptions. Opinion Our opinion is that REDACTED TEXT is required by law to provide this information to the Board. Business and Professions Code Section 4331 provides in part: All prescriptions filled shall be kept on file and open for inspection by duly constituted authorities for a period of at least three years, and any person who willfully fails to do so is guilty of a misdemeanor…. (Emphasis added). In interpreting and applying Section 4331, the State Board of Pharmacy has adopted Regulation 1764 (Title 16, California Administrative Code), which provides in part: No pharmacist shall exhibit, discuss, or reveal the contents of any prescription…with any person other than the patient or his authorized

representative, the prescriber or other licensed practitioner then caring for the patient, another licensed pharmacist serving the patient, or a person duly authorized by law to receive such information. (Emphasis added). The phrases emphasized above are not further defined or limited either in the Pharmacy Law (Business and Professions Code Sections 4000 et seq) or in the regulations of the State Board of Pharmacy. Our opinion is that the Board of Equalization is both a “duly constituted authority” and a “person duly authorized by law” within the meaning of Section 4331 and Regulation 1764, because the Board has independent statutory authority to examine the records of taxpayers and other persons to ensure compliance with Sales and Use Tax Law. Government Code Section 15618 provides: The board may examine, as a board, individually, or through its staff, the books, accounts, and papers of all persons required to report it, or having knowledge of the affairs of those required so to report. Revenue and Taxation Code Section 7054 provides: The board or any person authorized in writing by it may examine the books, papers, records and equipment of any person selling tangible personal property and any person liable for the use tax and may investigate the character of the business of the person in order to verify the accuracy of any return made, or, if no return is made by the person, to ascertain and determine the amount required to be paid. We note that it is a misdemeanor for any person to fail or refuse to furnish data required by the Board. Revenue and Taxation Code Section 7151. Also, the information which a Board auditor obtains by an examination of taxpayer’s records is required by law to be kept confidential, with certain exceptions not relevant here. Government Code Section 15619(a); Revenue and Taxation Code Section 7056. I have discussed this matter with REDACTED TEXT, State Board of Pharmacy, REDACTED TEXT, Sacramento, CA, and REDACTED TEXT. We cannot of course give you a written opinion on behalf of the Board of Pharmacy, but you are invited to call or write REDACTED TEXT, in addition to the undersigned, if you have any questions or comments about this letter. Very truly yours, John Abbott Tax Counsel