Does a medical-products distributor have to charge sales tax on alcohol prep swabs, iodine prep swabs, and antiseptic towelettes sold to healthcare practitioners?

Plain-English summary

Moore Medical LLC distributes medical supplies to physicians' offices, EMS providers, schools, and similar non-hospital healthcare settings, including three closely related products: alcohol prep swabs, iodine prep swabs, and antiseptic towelettes. Even though all three products are antiseptics sold in similar sterile packaging, the Department drew a sharp line between them based on how they're actually used.

The alcohol and iodine prep swabs are used directly ON PATIENTS to sterilize the skin before an injection. New York's drugs-and-medicines exemption covers items intended for use in the cure, mitigation, treatment, or prevention of illness or disease in human beings — and the regulations specifically say the delivery format (a disposable wipe or saturated pad, for instance) doesn't affect that exempt status. So these two swab products are exempt drugs or medicines.

The antiseptic towelettes, by contrast, are used to sterilize medical equipment and supplies, wash and disinfect a practitioner's hands, or otherwise prevent infection during a procedure — not applied directly to a patient's body as treatment. Because they aren't drugs or medicines "for use... in human beings" in that direct sense, they're ordinary taxable medical supplies, and New York's regulations specifically say medical supplies purchased for use in performing medical services for compensation aren't exempt.

What this means for you

Medical supply distributors

Don't assume every antiseptic or prep product in your catalog gets the same tax treatment — the Department looks at how the item is actually used, not just its chemical function. Items applied directly to a patient's body for treatment purposes are exempt drugs/medicines; items used for equipment sterilization, hand hygiene, or general infection control around a procedure are taxable supplies.

Healthcare practices and pharmacies

If you're buying supplies for medical services you perform for compensation, the general medical-supplies exemption doesn't apply to you the way it applies to a patient buying supplies for personal use — check whether the specific item is a "drug or medicine" (exempt regardless of who buys it) or a "supply" (taxable when bought by a practitioner for compensated medical services).

Accountants and tax professionals

This ruling is a clean, narrow illustration of the drug/medicine-versus-supply line under 20 NYCRR 528.4: patient-applied antiseptics are exempt, hand/equipment antiseptics are taxable, even when sold by the same distributor in near-identical packaging.

Common questions

Q: Are alcohol and iodine prep swabs exempt from New York sales tax?
A: Yes, when they're used on patients to sterilize an injection site — they qualify as exempt drugs or medicines.

Q: Are antiseptic hand-wipes and equipment-cleaning towelettes taxable?
A: Yes, when they're used to clean hands, equipment, or supplies rather than applied directly to a patient for treatment purposes.

Q: Does the delivery format (wipe, pad, swab) matter for the exemption?
A: No — the regulations say the base or delivery medium doesn't affect a drug or medicine's exempt status; what matters is the item's use.

Q: Can another medical supplier rely on this Advisory Opinion?
A: No. It binds the Department only for the petitioner and facts described; a similar product with a different marketed use should be checked independently.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (imposition of sales tax)
• Tax Law § 1115(a)(3) (drugs, medicines, medical equipment and supplies exemption)
• 20 NYCRR 528.4(a), (b), (e), (g), (h)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2006.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-06(13)S
Sales Tax
April 11, 2006

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S050930A

On September 30, 2005, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Moore Medical LLC, P. O. Box 1500, 389 John Downey Drive,
New Britain, Connecticut, 06050. Petitioner, Moore Medical LLC, provided additional
information pertaining to the Petition on November 9, 2005.
The issue raised by Petitioner is whether it is required to collect sales tax on its sales of
alcohol prep swabs, iodine prep swabs and antiseptic towelettes when sold by Petitioner to
persons using these items to provide medical or similar services for compensation.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a specialty direct marketer and distributor of medical, surgical
and pharmaceutical products to healthcare practices and facilities in non-hospital settings,
including physicians’ offices, emergency medical services, schools, correctional institutions,
municipalities, occupational healthcare offices and other specialty practice communities.
Petitioner sells alcohol prep swabs, iodine prep swabs and antiseptic towelettes for use by
healthcare practitioners in performance of their medical services. The alcohol and iodine prep
swabs are used on patients to sterilize injection sites, while the antiseptic towelettes are used to
sterilize or disinfect medical equipment and supplies; to wash, disinfect and cleanse
practitioners’ hands; and to otherwise prevent infection resulting from medical procedures.
Applicable law and regulations
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales imposed
under subdivision (a) of section eleven hundred five and the compensating use tax
imposed under section eleven hundred ten:

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(3) Drugs and medicines intended for use, internally or externally, in the cure,
mitigation, treatment or prevention of illnesses or diseases in human beings, medical
equipment (including component parts thereof) and supplies required for such use or to
correct or alleviate physical incapacity, and products consumed by humans for the
preservation of health but not including cosmetics or toilet articles notwithstanding the
presence of medicinal ingredients therein or medical equipment (including component
parts thereof) and supplies, other than such drugs and medicines, purchased at retail for
use in performing medical and similar services for compensation.
Section 528.4 of the Sales and Use Tax Regulations ("Regulations") provides, in part:
Drugs and medicines; medical equipment and supplies. (a) Exemption. (1) Drugs
and medicines intended for the use, internally or externally in the cure, mitigation,
treatment or prevention of illnesses or diseases in human beings, medical equipment
(including component parts thereof) and supplies required for such use or to correct or
alleviate physical incapacity, and products consumed by humans for the preservation of
health are exempt.
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(b) Drugs and medicines. (1) Drugs and medicines mean:
(i) articles, whether or not a prescription is required for purchase, which
are recognized as drugs or medicines in the United States Pharmacopeia,
Homeopathic Pharmacopeia of the United States, or National Formulary, and
intended for use in the diagnosis, cure, mitigation, treatment or prevention of
disease in humans;
(ii) articles (other than food) intended to affect the structure or any
function of the human body.
(2) The base or vehicle used (oil, ointment, talc, etc.) and the medium used for
delivery (disposable wipe, syringe, saturated pad, etc.) of a drug or medicine will not
affect its exempt status.
(3) Products consumed by humans for the preservation of health include other
substances used internally or externally, which are not ordinarily considered drugs or
medicines.

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Example 1: Analgesics, antiseptics, antacids, cough and cold remedies,
laxatives, aspirin, boric acid ointment, cod liver oil and castor oil are
exempt.
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Example 3: Insulin that is packaged with disposable syringes is exempt.
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(e) Medical equipment. (1) Medical equipment means machinery, apparatus and
other devices (other than prosthetic aids, hearing aids, eyeglasses and artificial devices
which qualify for exemption under section 1115(a)(4) of the Tax Law), which are
intended for use in the cure, mitigation, treatment or prevention of illnesses or diseases or
the correction or alleviation of physical incapacity in human beings.
(2) To qualify, such equipment must be primarily and customarily used for
medical purposes and not be generally useful in the absence of illness, injury or physical
incapacity.
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Example 1: Items such as hospital beds, wheel chairs . . . iron lungs,
respirators, oxygen tents, crutches, back and neck braces, trusses, trapeze
bars, walkers, inhalators, nebulizers and traction equipment are exempt
medical equipment.
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(4) Medical equipment is not exempt if purchased by a person performing medical
or similar services for compensation. (See subdivision (g) of this section.)
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(g) Supplies. (1) Supplies used in the cure, mitigation, treatment or prevention of
illnesses or diseases or for the correction and alleviation of physical incapacity are
exempt.
Example 1: Colostomy bags and the necessary accoutrements required for
attachment are medical supplies.
Example 2: Bandages, gauze and dressings are medical supplies.

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Example 3: Disposable hypodermic syringes and litmus paper used by
diabetics are medical supplies.
(2) Medical supplies are not exempt if purchased by a person performing medical
or similar services for compensation. (See subdivision (h) of this section.)
(h) Taxable medical equipment and supplies. (1) Medical equipment and supplies
purchased for use in performing medical or similar services for compensation are not
exempt from tax.
Example 1: Stethoscopes, syringes, wheel chairs, etc. purchased by
physicians are not exempt.
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Example 3: Bandages, gauze, dressings, etc., are not exempt when
purchased by a physician, ambulance service or other person who will use
them in performing a medical service for compensation.
Opinion
Section 1115(a)(3) of the Tax Law provides an exemption from the sales tax imposed by
section 1105(a) of the Tax Law for purchases of drugs and medicines intended for use, internally
or externally, in the cure, mitigation, treatment or prevention of illness or disease in human
beings. Medical iodine, alcohol, and other antiseptics are considered to be exempt drugs and
medicines when sold in sterile packaging for use internally or externally to prevent illness or
disease in human beings as contemplated by section 1115(a)(3) of the Tax Law. See section
528.4(b)(3), Example 1, of the Regulations and Publication 840, entitled A Guide To Sales Tax
For Drugstores and Pharmacies (8/98). Section 528.4(b)(2) of the Regulations states that the
medium used for delivery (disposable wipe, syringe, saturated pad, etc.) of a drug or medicine
will not affect its exempt status. Section 528.4 further distinguishes between exempt drugs and
medicines and medical equipment and supplies by stating that insulin packaged with disposable
syringes (presumably for use directly on patients) is exempt from sales and use tax as the
purchase of a drug or medicine (see section 528.4[b][3], Example 3), but that disposable
hypodermic syringes are taxable medical supplies when purchased by a person performing
medical or similar services for compensation (see section 528.4[g] and [h]). Therefore, sales by
Petitioner of the alcohol prep swabs and iodine prep swabs are purchases of drugs or medicines
exempt from the sales and use tax because they are used on patients to sterilize injection sites.
However, sales by Petitioner of antiseptic towelettes are not drugs or medicines for use in
the cure, mitigation, treatment or prevention of illnesses or diseases in human beings as

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contemplated by section 1115(a)(3) of the Tax Law since they are used by Petitioner's customers
to sterilize or disinfect medical equipment and supplies, to wash, disinfect and cleanse
practitioners’ hands or to otherwise prevent infection resulting from medical procedures.
Therefore, Petitioner's sales of these items are subject to sales tax.

DATED: April 11, 2006

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.