Does a pharmacy charge New York sales tax on human prescription drugs (like allergy medicine) that are dispensed for use on an animal?

Plain-English summary

A company that owns two pharmacies charges sales tax on medication that was originally made for human use (allergy medicine, for example) when it's prescribed and dispensed for use on an animal. It noticed that some other pharmacies don't charge tax in that situation, and asked the Department for the correct rule. The answer is "it depends on who's buying and what the animal is." The stub headline said simply "subject to sales tax," but the real holding carves out a specific exemption.

New York exempts drugs and medicines intended to treat illness in human beings (Tax Law § 1115(a)(3)). That human-drug exemption does not apply just because the same pill is given to an animal — once it's dispensed for animal use, the human exemption is off the table, and the default is that the sale is taxable. A veterinarian's purchases of tangible personal property are generally taxable too (20 NYCRR 528.24).

But there's a targeted farm/veterinary exemption. Tax Law § 1115(f)(2) exempts drugs or medicines purchased or used by a licensed veterinarian for use in veterinary medicine on livestock or poultry used in the production for sale of tangible personal property by farming. The same exemption extends to a person eligible for the farm production exemption (§ 1115(a)(6)) — someone predominantly engaged in producing TPP by farming. So the medication is exempt only when (1) the buyer is a licensed vet or a farm-production-eligible person, and (2) it's for use on farm livestock or poultry raised for sale. The pharmacy supports the exempt sale by collecting Form ST-125 (Farmers and Commercial Horse Boarding Operators Exemption Certificate) in good faith and keeping records. Medication for pets (dogs, cats, horses kept for personal use) and any other animal that doesn't meet the farm-production test is taxable.

What this means for you

Pharmacies dispensing human drugs for animal use

Don't treat the human-drug exemption (§ 1115(a)(3)) as covering animal use — it doesn't. Your default is to charge sales tax when a human medication is dispensed for an animal. You may sell exempt only when your customer is a licensed veterinarian or a farm-production-eligible buyer using the medication on livestock or poultry raised for sale, and you take a timely, properly completed Form ST-125 in good faith and retain it. No certificate, or a pet owner buying for a pet, means collect the tax.

Veterinarians and farmers

If you're a licensed vet or you qualify for the farm production exemption and you're treating farm livestock or poultry raised for sale, you can buy these medications exempt by giving the pharmacy Form ST-125. Buying medication for companion animals/pets, or for animals not raised for sale, doesn't qualify — expect to pay tax. If you're unsure of the use at purchase, you generally pay tax and can seek a refund (Form AU-11) if it later turns out to qualify.

Pet owners

Human prescription drugs dispensed for your pet are taxable. The exemption is built around farm production, not companion animals.

Accountants and tax professionals

The interaction to remember: § 1115(a)(3) (human drugs) does not reach animal use; § 1115(f)(2) provides a narrow exemption keyed to licensed veterinarians (and § 1115(a)(6) farm producers) treating livestock/poultry raised for sale; and § 528.24 makes a vet's TPP purchases taxable by default. Substantiation runs through Form ST-125 and the recordkeeping rules (20 NYCRR 533.2(d); TB-ST-770). This mirrors the veterinary blood-products holding in TSB-A-24(22)S.

Common questions

Q: A pharmacy dispenses a human allergy drug for someone's dog — is it taxable?
A: Yes. The human-drug exemption (§ 1115(a)(3)) doesn't apply to animal use, and a pet isn't farm livestock/poultry raised for sale, so the sale is taxable.

Q: When is medication dispensed for an animal exempt?
A: Only when the buyer is a licensed veterinarian or a farm-production-eligible person, and the medication is for use on livestock or poultry used in the production for sale of TPP by farming (Tax Law § 1115(f)(2), § 1115(a)(6)). The pharmacy must collect Form ST-125.

Q: What document supports the exemption?
A: Form ST-125 (Farmers and Commercial Horse Boarding Operators Exemption Certificate), taken in good faith, timely, and properly completed, with records retained (20 NYCRR 533.2(d); TB-ST-770).

Q: What if I'm not sure whether the use qualifies at the time of sale?
A: The default is to charge tax. If it later turns out the purchase qualified for the exemption, a refund can be sought (Form AU-11).

Q: Can I rely on this opinion?
A: No. An Advisory Opinion binds the Department only as to the petitioner and the facts presented. It illustrates the Department's reasoning but cannot be relied on by another taxpayer.

Citations and references

Statutes and regulations:
- Tax Law § 1115(a)(3) (drugs and medicines for use on human beings are exempt)
- Tax Law § 1115(f)(2) (drugs/medicines used by veterinarians on farm livestock or poultry raised for sale are exempt)
- Tax Law § 1115(a)(6) (farm production exemption — predominantly engaged in producing TPP by farming)
- 20 NYCRR 528.24 (a veterinarian's purchases of tangible personal property are generally taxable)

Forms and guidance referenced: Form ST-125 (Farmers and Commercial Horse Boarding Operators Exemption Certificate); 20 NYCRR 533.2(d); TB-ST-770 (Recordkeeping Requirements for Sales Tax Vendors); Form AU-11 (refund claim).

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
• Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-35s.htm
• Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-35s.pdf

Original ruling text

Sales Tax
August 20, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for an Advisory Opinion from [ redacted ] (“Petitioner”). Petitioner asks if sales tax is imposed on receipts from the sale of prescription medication originally intended for human use but dispensed by a pharmacy for use on an animal.

We conclude that the prescription medication is exempt from sales tax when purchased by a licensed veterinarian, or a person predominantly engaged in the production of tangible personal property by farming, for use on livestock or poultry used in the production for sale of tangible personal property by farming.

Facts

Petitioner owns two pharmacies that charge sales tax on medication originally intended for human use, such as allergy medicine, but prescribed to and dispensed for use on an animal. Petitioner found that some pharmacies do not charge sales tax in these circumstances and seeks clarification about whether it must charge sales tax on medication it dispenses that is prescribed for use on an animal.

Analysis

Drugs and medicines intended for use, internally or externally in the cure, mitigation, treatment, or prevention of illnesses or diseases in human beings are exempt from sales tax. See Tax Law § 1115(a)(3). Generally, purchases of tangible personal property by a veterinarian for use in the practice of veterinary medicine or performing taxable services are subject to tax. See 20 NYCRR 528.24. However, Tax Law § 1115(f)(2) exempts drugs or medicines, purchased or used by veterinarians licensed and registered as required by New York State Education Law, for use in the practice of veterinary medicine on livestock or poultry used in the production for sale of tangible personal property by farming. This exemption also applies to purchases of drugs or medicines for use on such poultry or livestock by a person eligible for the farm production exemption in Tax Law § 1115(a)(6). To qualify for that exemption, a person must be predominantly engaged in producing tangible personal property by farming.

If Petitioner’s customer is a licensed veterinarian, or a person eligible for the farm production exemption, and the prescription medication is purchased for use on livestock or poultry used in the production for sale of tangible personal property by farming, such medication is exempt from sales tax. Petitioner is not required to collect sales tax on such purchases if it receives from its customer in good faith a timely provided and properly completed Form ST-125 – Farmers and Commercial Horse Boarding Operators Exemption Certificate. Petitioner must retain documentation of that exemption. See 20 NYCRR 533.2(d); TB-ST-770 – Recordkeeping Requirements for Sales Tax Vendors. Purchases of medication for use on animals that do not qualify for the exemption under Tax Law § 1115(f) are subject to sales tax, and Petitioner must collect and remit sales tax on those purchases.

DATED: August 20, 2024

Mary Ellen Ladouceur
Principal Attorney

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.