Were listed nonprescription skin-care products exempt when dermatologists sold them to their own patients?

Plain-English summary

California concluded that the listed skin cleansers, antiseptics, antipsoriatics, antibiotic ointment, shampoo, antiviral cream, emollients, keratolytic plaster, and sunscreens were medicines when licensed dermatologists sold them to their own patients specifically to treat skin disorders or prevent adverse skin conditions.

The result applied even though the products were outside the prescription-drug classification. It rested on the physician-furnishing rule and the products' intended treatment or prevention use.

Common questions

Did the products have to be prescription drugs?

No. The opinion said they were outside that classification but still qualified under the stated medicine definition and physician-furnishing rule.

Did ordinary retail sales receive the same treatment?

The opinion addressed licensed dermatologists' sales to their own patients for treatment; it did not decide broader retail sales.

Does the source contain a section-number conflict?

Yes. It quotes and applies section 6369(b), then later prints “Section 639(b)” in its conclusion.

Citations and references

• California Revenue and Taxation Code section 6051 — general retail-sales tax rule stated in the opinion
• California Revenue and Taxation Code section 6369(a)(2) — physician-furnished medicine exemption applied to the described sales
• California Revenue and Taxation Code section 6369(b) — medicine definition quoted in the opinion; the source later prints “639(b)” once
• California Sales and Use Tax Regulation 1591 — enclosed for reference as implementing section 6369

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/425-0699.pdf

Original ruling text

425.0699

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 322-3684

July 1, 1988

Mr. D--- F. E---, President
S--- D---, Inc.
XXX --- --- Drive
--- ---, CA XXXXX

SR -- XX-XXXXXX
Dear Mr. E---:
Your May 5, 1988 letter to Tax Counsel Herb Cohen has been referred to me for a reply. You request an opinion concerning the correct application of tax to certain sales of pharmaceutical products. As I understand the facts, the pharmaceutical products in question are outside the prescription drug classification, but they are products sold by licensed dermatologists to their patients specifically for the treatment of skin disorders, or the prevention of adverse skin conditions. You list the products as follows: “Skin Cleansers and Antiseptics Nu-Soap Lotion (Cetaphil) Chlorhexidine Gluconate 4% Cleanser (Hibiclens) Chlorhexidine Gluconate 4% Cleanser (Hibiclens) Antipsoriatics Coal Tar Solution 20% USP Psorigel Solution

Mr. D--- F. E---

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July 1, 1988
425.0699

Antibiotics
Neomycin, Polymyxin Bacitracin Ointmen (Neosporin)
Antiseborrheic
Selenium Sulfide Lotion Shampoo 1% (Selsun Blue)
Antiviral
Zostrix Cream 0.025%
Emollients
Therapeutic Bath Oil (Alpha Keri)
Lubriderm Lotion (unscented)
Eucerin Cream
Aquacare/HP Cream
Lacticare Lotion
Minon Moisturizer
Keratolytics
Salicylic Acid 40% Plaster
Sunscreen
Neutrogena paba free
Ti-Screen SPF 30”
You request an opinion as to whether the dermatologists’ gross receipts from the sale of these products to their patients for the treatment of those patients are taxable. California Sales and Use Tax Law imposes a tax on the gross receipts of retailers from the retail sale of tangible personal property in this state unless such sale is otherwise exempt or excluded from taxation by statute (Rev. & Tax. Code § 6051). Revenue and Taxation Code Section 6369(a)(2) exempts from tax medicines furnished by a licensed physician, surgeon, dentist, or podiatrist to his or her own patients for the treatment of that patient. The term “medicines” is defined in Section 6369(b) to “mean and include any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment, or prevention of disease and which is commonly recognized as a substance or preparation intended for such use.” Applying the above criteria, it is our opinion that the listed pharmaceutical products which treat skin disorders or prevent adverse skin conditions are medicines pursuant to Section 639(b) of the Revenue and Taxation Code. Accordingly, the gross receipts from a dermatologist’s sale of these products to his or her patients for the treatment of those patients are exempt from tax pursuant to Section 6369(a)(2).

Mr. D--- F. E---

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July 1, 1988
425.0699

I hope the above information is helpful. Enclosed for your review and reference is a copy of Sales and Use Tax Regulation 1591 (Prescription Medicines) which interprets and applies Revenue and Taxation Code Section 6369. If you have any further questions concerning this topic, please do not hesitate to contact this office. Very truly yours,

Robert J. Stipe
Tax Counsel

RJS:sr
Enc.