Were physician-administered dermal fillers exempt from Louisiana state sales and use tax as medical drugs?

Plain-English summary

Louisiana treated dermal fillers as pharmaceutical drugs exempt from state sales and use tax when administered by a physician or under the physician's supervision. The Department found that the products were used to treat diseases and abnormal conditions, even though many were also used for cosmetic enhancement.

The Department said it would not investigate patient by patient whether a particular use was correction, enhancement, or both. Local taxing jurisdictions were not bound by the ruling.

Why dermal fillers counted as drugs

The products were liquids or dried compounds mixed with liquid and injected by syringe. The ruling identified then-current examples including Botox, Restylane, Radiesse, Sculptra, Juvedérm, and Zyplast, generally made from collagen or hyaluronic acids mixed with other substances.

La. R.S. 47:301(20) included pharmaceuticals and medical devices prescribed for treatment of disease within the definition of drugs. Applying Civil Code article 11's general-meaning rule, the Department described a pharmaceutical as a drug or medicine used in medical treatment and a drug as a chemical substance used in diagnosis, treatment, or prevention of disease or another abnormal condition.

The products' chemical compositions fit that ordinary pharmaceutical-drug meaning.

Disease treatment was the key exemption condition

La. R.S. 47:305(D)(1)(j) exempted physician- or dentist-prescribed drugs for state sales and use tax. Section 47:305(D)(1)(s) covered qualifying medical devices used by or administered to a patient in treating disease under a licensed physician's supervision and prescription.

The ruling said product classification alone was not enough; the significant question was whether dermal fillers treated disease.

Medical uses identified in the ruling

The Department listed uses that went beyond ordinary appearance enhancement, including:

• soft-tissue defects causing certain stress urinary incontinence;
• facial lipoatrophy associated with HIV;
• perlèche, involving cracks at the corners of the mouth;
• corneal transplantation, glaucoma, and retinal-detachment surgery;
• injections near vocal folds and muscles to facilitate speech and prevent liquid aspiration;
• maxillofacial augmentation;
• knee osteoarthritis; and
• restoration of facial contours altered by birth defects, disease, accident, or injury.

Because the same products treated disease and abnormal conditions, their use for aging-face contour restoration did not remove them from the pharmaceutical category.

Cosmetic use did not trigger a patient-by-patient tax inquiry

The Department acknowledged that demand could be for appearance enhancement rather than defect correction. It nevertheless left the treatment decision to the physician and patient and said it would not ask how much of an individual use was corrective, enhancing, or both.

Its conclusion was that state sales or use tax would not be collected on dermal fillers administered by a physician or under the physician's supervision.

What this means for you

Physicians and medical practices

The ruling tied the state-tax result to physician administration or supervision. Preserve records showing the product and clinical arrangement.

Cosmetic medical practices

Under this ruling, mixed cosmetic and therapeutic uses did not require the Department to classify every patient's purpose. Current law and later guidance still need review.

Multijurisdiction sellers

Do not automatically extend the ruling to local tax. Its conclusion explicitly said local taxing jurisdictions were not bound.

Common questions

Q: Did Louisiana classify dermal fillers as pharmaceuticals?

A: Yes. The Department found their compositions fit the ordinary meaning of pharmaceutical drugs.

Q: Did dermal fillers have to be used only for disease treatment?

A: The ruling recognized both medical and cosmetic uses and declined to separate correction from enhancement for each patient.

Q: Who had to administer the product?

A: A physician, or another person acting under the physician's supervision, under the ruling's conclusion.

Q: Did the ruling bind local taxing jurisdictions?

A: No.

Citations and references

• La. R.S. 47:305(D)(1)(j) — state exemption for drugs prescribed by a physician or dentist
• La. R.S. 47:305(D)(1)(s) — state exemption for qualifying medical devices used in disease treatment
• La. R.S. 47:301(20) — definition of drugs
• Louisiana Civil Code article 11 — statutory words receive their general prevailing meaning
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 08-003

Original ruling text

RPage 1 of 3Revenue Revenue RevenueRRRRevenue Information Bulletin No 01-xxxx Transactions by Roustabouts, “Work as Directed" Service ProvidersrrEVENUErRRR

Revenue Ruling
No. 08- 003
February 4, 2008
Sales and Use Tax
Sales Tax Exemption as Medical Drug for Dermal Filler Substances Purpose: The purpose of this Revenue Ruling is to address whether or not substances and/or compounds used in medical practice as dermal fillers are subject to Louisiana sales tax or excluded by exemption under R.S. 47:305(D)(1). Law: Exclusions and Exemptions from (sales) tax include: R.S. 47:305 (D)(1): The sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in the taxing jurisdiction of the following tangible personal property is hereby specifically exempted from the tax imposed by taxing authorities, except as otherwise provided in this Paragraph: (j) Solely for purposes of the state sales and use tax, drugs prescribed by a physician or dentist; (s) Solely for the purposes of the state sales and use tax, and all medical devices used exclusively by the patient in the medical treatment of various diseases or administered exclusively to the patient by a physician, nurse, or other health care professional or health care facility in the medical treatment of various diseases under the supervision of and prescribed by a licensed physician. R.S. 47:301(20) provides the definition of “drugs” as: “Drugs includes all pharmaceuticals and medical devices which are prescribed for use in the treatment of any medical disease.” Analysis/Discussion: Civil Code art. 11 states “the words of a law must be given their general prevailing meaning.” The products in question are termed “dermal fillers” and are either purchased in liquid form or a dried form then mixed with liquid to obtain viscosity. They are injected into the body through a syringe. Current generations of these products include by brand name Botox, Restylane, Radiesse, Sculptra, Juvedérm, Zyplast, etc. The products are in general comprised of collagen or hyaluronic acids mixed with other substances capable of maintaining liquidity. A pharmaceutical is defined as “a drug or medicine used in medical treatment.” A drug is generally understood to be a “chemical substance that affects the processes of the mind or body” and “any chemical compound used in the diagnosis, treatment, or prevention of disease or other abnormal condition.” A device is generally understood to be a tool, equipment, machine, implement, or instrument. The compositions of the materials used in the products at issue are compound substances that fall within the definition of a drug under ordinary construction of the term. The Department will conclude that the products are compounds that have the properties of a pharmaceutical “drug”, as required for the exemption granted by R.S. 47:305(D)(1)(j). A Revenue Ruling is issued under the authority of LAC 61III.101 (C ). A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is a written statement issued to apply principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the department's position and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.

Revenue Ruling No. 08-003
Page 2 of 3

Therefore, based upon the composition of the product itself, the Department adopts the use of the term pharmaceutical to determine the question of which statute is applicable to the instant issue. Whether the product is classified as a “pharmaceutical” or a “device” does not answer the question of whether the product qualifies for an exemption under R.S. 47:305(D)(1). The more significant issue presented is whether or not the product is being used to treat “disease”, as both statutes authorizing the exemption require the product be used in treatment of disease in order for the exemption to apply. Disease is defined as “a pathological condition of a part, organ, or system of an organism resulting from various causes, such as infection, genetic defect, or environmental stress, and characterized by an identifiable group of signs or symptoms” and, “a condition or tendency, as of society, regarded as abnormal and harmful.” At this time, numerous products are in use with varying compositions, and most if not all are used for some cosmetic enhancement purposes. However, some if not all of these products are used in the direct treatment of disease and/or rehabilitation of serious medical conditions unrelated to mere enhancement of the appearance of aging tissue and muscle. Collagen and hyaluronic acid fillers are used to treat some soft tissue defects that lead to certain forms of stress urinary incontinence; facial lipoatrophy (muscle wasting) resulting from diseases such as HIV; and perlèche, a condition whereby deep cracks and splits form at the corners of the mouth that can bleed when the mouth is opened. Hyaluronic acid is also well suited to biomedical applications targeting skin, cartilage, and eye tissues, including corneal transplantation surgery, glaucoma surgery and surgery to repair retinal detachment. One or more of the above substances may be injected near the vocal folds and vocalis muscle to facilitate speech and prevent inadvertent aspiration of liquids. One or more of the products are also used for maxillofacial augmentation and to treat osteoarthritis of the knee. It is anticipated that not only these products, but future generations of such products, will be suitable and medically effective in treatment of other disease and abnormal conditions and functions of the human body. The skin is the largest organ of the body. With respect to the products’ use for facial appearance, such products are used for normalization of facial contours due to birth defects, disease (such as with HIV and AIDS) and loss of normal appearance due to accident or injury. The fact that the products are also used for facial contour restoration for the aging face does not remove them from the category of pharmaceuticals used for medical treatment of disease and abnormal conditions. The Department recognizes that the demand for such pharmaceutical product may be for enhancement of appearance and not correction of defect. Nevertheless, decisions on the use of such products are made between the physician and the patient. The Department will not query to what extent the benefits of such usages to an individual patient should be applied to correction or enhancement, or both. Conclusion: The Department finds that the products known as “dermal fillers” are used to treat disease and abnormal conditions, and will not collect sales or use taxes on the use of such products when

Revenue Ruling No. 08-003
Page 3 of 3

administered by a physician or under his supervision. Local taxing jurisdictions are not bound by the position of the Department. Cynthia Bridges Secretary By:

Johnette L. Martin
Attorney
Policy Services Division