Were injectable medications and biologics exempt from South Carolina sales and use tax for fiscal year 2013-2014 (per SC IL #13-9)?

Plain-English summary

As of this letter, injectable medications and injectable biologics were NOT yet exempt from South Carolina sales and use tax — the growth trigger for the exemption had not been met, so the ordinary 6% state tax (plus local tax) still applied. S.C. Code § 12-36-2120(80) creates an exemption for certain injectable medications and injectable biologics, but only "so long as certain requirements are satisfied."

How the phase-in works. The exemption phases in based on the Board of Economic Advisors (BEA) revenue forecast, determined each February 15:

• If the BEA forecasts annual general fund growth of at least 2% for the next fiscal year, the tax rate on these items is reduced to 3% for sales made on or after July 1 of the state fiscal year following that February 15 forecast.
• If the BEA again forecasts 2% growth on a subsequent February 15, sales on or after the following July 1 become fully exempt.

What happened. At its February 15, 2013 meeting, the BEA did not forecast sufficient revenue growth for the upcoming fiscal year, so the exemption did not become effective July 1, 2013.

Bottom line. Sales of these injectable medications and biologics remained subject to the 6% state sales and use tax plus applicable local sales and use tax until at least June 30, 2014, unless otherwise exempt under another provision. The letter points to SC Revenue Ruling #11-3 for other exemptions that may apply to certain medicines.

What this means for you

If you are a physician's office, dialysis facility, or supplier

For the period this letter covers, keep charging the ordinary 6% state tax plus applicable local tax on these injectable medications and biologics — the § 12-36-2120(80) exemption had not been triggered. Check whether another medicine exemption applies (SC Revenue Ruling #11-3), and watch the BEA's next February 15 forecast, which controls when the phase-in begins.

Common questions

Q: Were injectable medications exempt as of this letter?
A: No. The BEA's February 15, 2013 forecast did not meet the 2% growth trigger, so the exemption did not take effect July 1, 2013.

Q: What tax applied instead?
A: The 6% state sales and use tax plus any applicable local tax, until at least June 30, 2014, unless another exemption applied.

Q: When would the exemption start?
A: When the BEA forecasts at least 2% annual general fund growth on a February 15 — the rate then drops to 3% the following July 1, and a repeat 2% forecast makes the sales fully exempt the next July 1.

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL13-9.pdf

Original ruling text

State of South Carolina

Department of Revenue
300A Outlet Pointe Blvd., P.O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC INFORMATION LETTER #13-9

SUBJECT:

Certain Injectable Medications and Injectable Biologics
(Sales and Use Tax Exemption)

EFFECTIVE DATE: Applies to all periods open under the statute.
SUPERSEDES:

All previous advisory opinions and any oral directives in conflict
herewith.

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2010)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department.
An Information Letter has no
precedential value.

Code Section 12-36-2120(80) provides a sales and use tax exemption for certain injectable
medications and injectable biologics so long as certain requirements are satisfied. For the 20132014 fiscal year (July 1 through June 30), the state revenue growth requirements needed for this
exemption to be implemented have not been met.
The exemption will be phased in by reducing the rate of tax if the Board of Economic Advisors
(“BEA”) forecast annual general fund growth for the next fiscal year of at least 2%. This
determination will be made each February 15. If 2% or more annual general fund growth is
forecast, then the tax rate will be reduced to 3% for sales made on or after July 1st of the State
fiscal year following an initial February 15th forecast of 2% of growth. If 2% growth is forecast
by the BEA on a subsequent February 15th forecast, sales on or after July 1 of the following
fiscal year will be fully exempt.
At its February 15, 2013 meeting, the BEA did not forecast sufficient revenue growth for the
upcoming fiscal year for this exemption to become effective July 1, 2013.
Therefore, sales of certain injectable medications and injectable biologics are subject to the 6%
State sales and use tax plus applicable local sales and use tax until at least June 30, 2014, unless
otherwise exempt under another exemption provision. (See S.C. Revenue Ruling #11-3 for other
exemptions for certain medicines)