Which personal-care products — lotions, medicated powders, an acne kit, glucose tablets — are exempt from New York sales tax as drugs or medicines versus taxable as cosmetics?
Plain-English summary
A retailer asked whether nine personal-care and health products are subject to sales tax. New York exempts drugs and medicines (and dietary foods) but taxes cosmetics and toilet articles — and the presence of a "medicinal" ingredient does not turn a cosmetic into a drug. The Office of Counsel went product by product:
Taxable (cosmetics or toilet articles):
- Aveeno Daily Moisturizing Lotion, Gold Bond Anti-Itch Lotion, Gold Bond Extra Strength Lotion — lotions rubbed on the skin for protection/beautifying.
- Gold Bond Medicated Extra Strength Body Powder and Johnson's Medicated Baby Powder — medicated powders are still taxable toiletries; an added protectant doesn't make them drugs.
Exempt:
- Aveeno Clear Complexion (salicylic acid 0.5%) — an acne preparation with a recognized acne drug (FDA lists salicylic acid 0.5%–2%).
- Gold Bond Medicated Maximum Strength foot powder — exempt because it does more than deodorize: it absorbs excess moisture and fights odor-causing bacteria/fungus.
- Dex 4 Glucose Tablets — an exempt dietary food bearing a Nutrition Facts label.
A trap — the acne kit: the Acne Free Acne Clearing System bundles a benzoyl-peroxide cleanser and repair lotion (which alone would be exempt acne medicine) with a renewing toner that is a taxable cosmetic. Because the kit is sold as a single unit, the entire package is taxable (20 NYCRR 527.1(b)).
What this means for you
Drugstores, pharmacies, and personal-care retailers
Don't assume "medicated" means tax-exempt. Lotions and most medicated powders are taxable cosmetics/toiletries. Genuine acne preparations with an FDA-recognized active ingredient, anti-fungal/moisture-absorbing foot powders, and dietary foods are exempt. Watch bundled kits: one taxable component sold as a single unit makes the whole thing taxable.
Manufacturers and category managers
The exempt/taxable line tracks the FDA's recognized active ingredients (e.g., 21 CFR 333.310 for acne) and whether the product treats/prevents a condition versus grooming/beautifying.
Accountants and tax professionals
Apply § 1115(a)(3) drugs/medicines vs. 20 NYCRR 528.4(c)/(d) cosmetics-and-toiletries, the § 1115(a)(1)/528.2(c) dietary-food exemption, and the 527.1(b) single-unit rule for kits.
Common questions
Q: A product says "medicated" — isn't it tax-exempt?
A: Not necessarily. Cosmetics and toilet articles are taxable even with medicinal ingredients. It must qualify as a drug/medicine (e.g., a recognized acne active ingredient) to be exempt.
Q: Why is the whole acne kit taxable when parts of it are exempt?
A: It's sold as a single unit that includes a taxable cosmetic toner, so the entire price is taxable.
Q: Why is the foot powder exempt but the body powder taxable?
A: The foot powder fights fungus/odor-causing bacteria and absorbs moisture (medicinal), while the body and baby powders are treated as toiletries.
Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.
Citations and references
- Tax Law § 1105(a) (sales tax on retail sales of tangible personal property)
- Tax Law § 1115(a)(3) (exemption for drugs and medicines; excludes cosmetics and toilet articles)
- Tax Law § 1115(a)(1) (exemption for dietary foods and health supplements)
- 20 NYCRR 528.4(b) (drugs and medicines; acne preparations; foot powders), 528.4(c) (cosmetics), 528.4(d) (toilet articles), 528.4(a)(3)
- 20 NYCRR 528.2(c) (dietary food); 20 NYCRR 527.1(b) (single unit of taxable and exempt items taxed in full)
- 21 CFR 333.310 (FDA topical acne active ingredients); TB-ST-193; TSB-A-10(58)S
Source
- Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
- Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-43s.pdf
Original ruling text
New York State Department of Taxation and Finance
Office of Counsel
TSB-A-20(43)S
Sales Tax
October 20, 2020
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (hereinafter “Petitioner”). Petitioner asks whether various products it sells,
including lotions, powders, an acne clearing kit, and glucose tablets, are subject to sales tax.
We conclude that most of the products Petitioner describes are subject to sales tax.
However, three products described below (i.e., Aveeno Active Naturals® Clear Complexion,
Gold Bond® Medicated Maximum Strength Powder, and Dex 4® Fast Acting Glucose Tablets)
are exempt from sales tax.
Facts
Petitioner is a retailer that markets and sells, among other products, the following:
Aveeno Active Naturals® Daily Moisturizing Lotion, Gold Bond® Medicated Anti-Itch Lotion,
Gold Bond® Medicated Extra Strength Lotion, Aveeno Active Naturals® Clear Complexion,
Gold Bond® Medicated Extra Strength Body Powder, Johnson’s® Medicated Baby Powder,
Gold Bond® Medicated Maximum Strength Powder, Acne Free® Acne Clearing System, and
Dex 4® Fast Acting Glucose Tablets.
Aveeno Active Naturals® Daily Moisturizing Lotion is a moisturizer. Its label states it is
proven to “relieve dry skin” and “moisturize” for 24 hours.” It also claims to make skin “soft,
smooth and naturally healthy-looking.” This product’s packaging states that it “temporarily
protects and helps relieve chafed, chapped or cracked skin” and “helps protect from the drying
effects of wind and cold weather.”
Gold Bond® Medicated Anti-Itch Lotion is an anti-itch lotion for “Fast Lasting Itch
Relief.” The label states it is used to temporarily protect and relieve chapped or cracked skin for
temporary relief of pain and itching associated with, among other things, minor skin irritations,
cuts, burns, sunburns, and rashes due to poison ivy.
Gold Bond® Medicated Extra Strength Lotion is a body lotion used for the same
purposes as Gold Bond® Medicated Anti-Itch Lotion.
Aveeno Active Naturals® Clear Complexion is sold as a “daily moisturizer” and
“salicylic acid blemish treatment.” The packaging states it contains salicylic acid “to help clear
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up and help prevent blemishes.” Its active ingredient is salicylic acid (0.5%) and its purpose is
described as “Acne Medication.”
Gold Bond® Medicated Extra Strength Body Powder is a body powder used to
temporarily relieve the pain and itch associated with minor cuts and burns, sunburn, insect bites,
scrapes, prickly heat, rashes and minor skin irritations.
Johnson’s® Medicated Baby Powder is a baby powder used to treat and prevent diaper
rash and to protect chafed skin due to diaper rash and help seal out wetness. Its label states it is a
“medicated zinc oxide skin protectant.” Its label also states as follows: “3 way action protects,
treats & soothes irritated skin.”
Gold Bond® Medicated Maximum Strength Powder is a foot powder used to temporarily
relieve the pain and itch associated with minor skin irritations on the foot, to provide maximum
strength itch relief, absorb excess moisture, control foot odor and odor-causing bacteria and to
cool and soothe irritated skin.
Acne Free® Acne Clearing System is an acne clearing system that includes an oil-free
cleanser, renewing toner and repair lotion. All three items are labeled as “clear skin treatments”
and the cleanser and repair lotion both contain benzoyl peroxide (2.5% and 3.7% respectively).
The renewing toner is labeled as helping to reduce oil and refine pores. The box containing the
kit is labeled to treat all stages of acne 24 hours a day.
Dex 4® Fast Acting Glucose Tablets is a jar of 50 glucose tablets that the label states
raises low blood sugar fast and boosts energy. The directions instruct to “[c]hew desired amount
of glucose.”
Analysis
All retail sales of tangible personal property are subject to sales tax pursuant to Tax Law
§ 1105(a), unless otherwise exempted. Tax Law § 1115(a)(3) provides an exemption for
“[d]rugs and medicines intended for use, internally or externally, in the cure, mitigation,
treatment or prevention of illnesses or diseases in human beings … and products consumed by
humans for the preservation of health but not including cosmetics or toilet articles
notwithstanding the presence of medicinal ingredients therein ….” See TB-ST-193 (August 5,
2014); TSB-A-10(58)S.
The Sales and Use Tax Regulations define “drugs and medicines” as “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
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disease in humans”. 20 NYCRR 528.4(b)(1). The Regulations also provide that “[t]he 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.” 20 NYCRR
528.4(b)(2).
Other medicinal products used for the preservation of health, and products that are
intended to affect the structure or function of the human body are also exempt from sales tax. See
id. These products include, among others, acne preparations, lip balm intended to treat or prevent
chapped lips, products that prevent or treat athlete’s foot or other fungus infections, and
sunscreens. Id.
“Cosmetics” are “[a]rticles intended to be rubbed, poured, sprinkled or sprayed on,
introduced into, or otherwise applied to the human body for cleansing, beautifying, promoting
attractiveness, or altering the appearance, and articles intended for use as a component of any
such articles” 20 NYCRR 528.4(c). Cosmetics are taxable, “notwithstanding the presence of
medicinal ingredients therein.” 20 NYCRR 528.4(a)(3). “Toilet articles” are “[a]ny articles
advertised or held out for grooming purposes and those articles which are customarily used for
grooming purposes, regardless of the name by which they may be known ….” 20 NYCRR
528.4(d). Taxable cosmetics and toiletries include, among others, astringents, baby powder,
talcum powder, creams and lotions such as hand and body lotion, moisturizers and face cream,
pore cleansers and makeup. See TSB-ST-193.
Aveeno Active Naturals® Daily Moisturizing Lotion is labeled as a daily moisturizing
lotion used to protect and help cracked and drying skin. Gold Bond® Medicated Anti-Itch
Lotion is labeled as an anti-itch lotion used for, among other things, cracked or chapped skin and
poison ivy, oak or sumac. Gold Bond® Medicated Extra Strength Lotion is labeled as a body
lotion used for extra dry and itchy skin. These products are all lotions intended to be rubbed on
for beautifying purposes, and not for use in curing, mitigating or preventing illness or disease.
Accordingly, they are taxable cosmetics. See Tax Law § 1115(a)(3), 20 NYCRR 528.4(a);
Drugstores and Pharmacies TB-ST-193.
Aveeno Active Naturals® Clear Complexion is labeled as a “daily moisturizer” and
“salicylic acid blemish treatment.” The relevant regulation specifies in Example 4 that “[a]cne
preparations, including acne soaps, are exempt provided they contain a recognized drug or
medicine.” In determining whether a product qualifies as an acne preparation exempt from sales
tax, the Department looks to guidance from the U.S. Food and Drug Administration (FDA). The
FDA regulations provide a list of acne active ingredients in topical acne drug products. See 21
CFR 333.310. This list includes salicylic acid from 0.5% up to 2%. Because the active
ingredient in Product B is salicylic acid (0.5%) and its label lists its purpose as “acne
medication,” we conclude that this product is exempt from sales tax.
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Gold Bond® Medicated Extra Strength Body Powder is a powder that is labeled as
cooling, absorbing and itch relieving. Its purposes are listed as “anti-itch” and “skin protectant”
and its main ingredient is talc. Johnson’s® Medicated Baby Powder is corn starch-based baby
powder that is augmented with “zinc oxide skin protectant,” and is advertised to protect, treat
and sooth irritated skin. Both of these products are cosmetics or toiletries subject to sales tax.
See Drugstores and Pharmacies, TB-ST-193. The presence of a protective ingredient does not
transform these products into drugs or medicines. See TSB-A-10(58)S.
Gold Bond® Medicated Maximum Strength Powder is a foot powder that is labeled as
relieving itch, absorbing excess moisture and controlling foot odor. Its uses are described as
temporarily relieving the pain and its associated with minor skin irritation, absorbing excess
moisture, and helping to control foot odor and odor-causing bacteria. Foot powders that
eliminate excessive perspiration and prevent athletes foot and other fungal infections are exempt,
but foot powders that act only as deodorants are taxable. See NYCRR 528.4 (b)(3), Example 8.
Because this product is not merely a deodorant, but absorbs excess moisture and helps to prevent
the growth of odor-causing bacteria, it is exempt from sales tax.
Acne Free® Acne Clearing System is an acne clearing kit that includes a purifying
cleanser, renewing toner and repair lotion. Acne preparations are tax exempt provided they
contain a recognized drug or medicine. 20 NYCRR 528.4(b). The cleanser contains 2.5%
benzoyl peroxide and the repair lotion contains 3.7% benzoyl peroxide. The U.S. Food and Drug
Administration provides that benzoyl peroxide from 2.5% to 10% is an acne active ingredient.
Because the active ingredient contained in the cleanser and repair lotion contain a recognized
drug or medication for treating acne under 20 NYCRR 528(b)(3), those components the Acne
Clearing Kit are acne preparations exempt from sales tax. However, the renewing toner does not
contain a recognized acne medication. Among its ingredients are witch hazel, an astringent. It is
applied to the human body for beautifying and to promote attractiveness and therefore, is a
cosmetic subject to tax. See NYCRR 528.4(c). When tangible personal property composed of
taxable and exempt items is sold as a single unit, the tax shall be collected on the total price. 20
NYCRR 527.1(b). Accordingly, because the Acne Clearing System is sold as a single unit, the
receipts from the sale of the entire product are subject to tax.
Receipts from dietary foods and health supplements sold for human consumption are
exempt from sales tax. Tax Law § 1115(a)(1). “A dietary food is a food for a special dietary use
for humans and which bears on the label a statement of the dietary properties upon which its use
is based in whole or in part.” 20 NYCRR 528.2(c). Products intended to substitute or
supplement the ordinary diet or substitute for natural foods, including liquid diet products,
artificial sweeteners, and vitamins are exempt when sold for human consumption. 20 NYCRR
528.2(c). Dex 4® Fast Acting Glucose Tablets is a dietary product that contains glucose, a type
of sugar. Its package bears a “Nutrition Facts” label of its dietary properties upon which its use
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is based. Accordingly, it is a dietary food or health supplement that is exempt from tax. See Tax
Law § 1115(a)(1); 20 NYCRR 528.2(c).
DATED: October 20, 2020
/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:
An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.