Did qualifying medicine sales to professional medical, dental, or podiatry entities receive practitioner treatment?

Plain-English summary

California treated professional medical, dental, and podiatry corporations as having the same rights and privileges as the licensed practitioners through whom they rendered professional services. Qualifying medicine sales to those corporations therefore received the same treatment as sales to individual licensed practitioners under Regulation 1591(a)(4).

The letter reached the same result for professional partnerships composed of licensed practitioners. It reasoned that such partnerships were not separate from their members under the historical law and could not include unlicensed partners in a practice involving medicine, dentistry, or podiatry.

Common questions

Did the opinion cover partnerships as well as corporations?

Yes. It extended the same treatment to professional medical, dental, and podiatry partnerships.

Did every item sold to a professional practice become exempt?

No. The rule applied to medicines for treatment of a human being under the conditions of Regulation 1591(a)(4).

Citations and references

• California Sales and Use Tax Regulation 1591(a)(4) — qualifying medicine sales to licensed practitioners and professional entities
• California Business and Professions Code section 2406 and California Corporations Code sections 13401 and 13401.5 — professional-corporation authority discussed in the letter
• California Corporations Code sections 15001 et seq. — historical partnership treatment discussed in the letter

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/425-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/425-0163-200.pdf

Original ruling text

425.0163.200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916-322-3684
January 30, 1989
REDACTED TEXT
Dear REDACTED TEXT,
This is in reply to your November 25, 1988 letter.
You inquire whether the gross receipts from the sale of medicines to professional corporations or partnerships are exempt from tax to the same extent as the gross receipts from the sale of medicines to licensed physicians, surgeons, dentists or podiatrists are exempt from tax per Sales and Use Tax Regulation 1591(a)(4). A professional medical, dental or podiatry corporation is a corporation which is authorized to render professional services by licensed practitioners (Bus. & Prof. Code § 2406 and Cal. Corp. Code §§ 13401 and 13401.5). Therefore, it is our opinion that professional medical, dental or podiatry corporations are entitled to the same rights and privileges as are the individual licensed practitioners. Additionally, a partnership, in general, is not considered an entity separate and distinct from its members (Cal. Corp. Code §§ 15001 et seq.). Further, it is our understanding that licensed medical, dental or podiatry practitioners are not permitted to enter into partnerships with unlicensed individuals if any of the activities of that partnership consist of the practice of medicine, dentistry or podiatry. Therefore, it is our opinion that professional medical, dental or podiatry partnerships are entitled to the same rights and privileges as are individual licensed practitioners. Accordingly, pursuant to Sales and Use Tax Regulation 1591(a)(4) tax does not apply to the gross receipts from the sale of medicines for the treatment of a human being which medicines are sold to a professional medical, dental or podiatry corporation or partnership. I hope the above information is helpful. If you have any further questions concerning this topic, please do not hesitate to contact this office. Very truly yours,

RJS:sr

Robert J. Stipe
Tax Counsel