Is a non-needle pain medication that chemically forces its active ingredient below the skin, administered in a physician's office, exempt from South Carolina sales and use tax as an 'injectable medication'?

Plain-English summary

South Carolina's sales-tax exemption for injectable drugs (Code § 12-36-2120(80)) raises a definitional question when a product doesn't use a needle. SC Private Letter Ruling #22-2 answers it: a pain medication that chemically forces its active ingredient below the skin still counts as an "injectable medication" — and is exempt when administered in a physician's office.

The drug (published as "X," made by "ABC") is a non-opioid treatment for post-herpetic neuralgia and diabetic peripheral neuropathy. It uses a proprietary matrix system with a chemical carrier that supersaturates the active ingredient and forces it through the skin's channels into the dermis — the FDA does not consider it a "patch." It must be applied by, or under the direct supervision of, a physician in a medical office.

To decide whether that's an "injection," the Department went to the dictionary: to "inject" is "to force a fluid into (as for medical purposes)." (South Carolina courts routinely use dictionary definitions for undefined statutory words — Hay, Fennell, Etiwan Fertilizer.) The exemption statute doesn't limit the method of injection to a needle and syringe (a jet injector, for example, would also count). Since the matrix system forces the medication into the body, it's an injectable medication, and — administered in a physician's office — it's exempt under § 12-36-2120(80).

The bright line the ruling draws: § 12-36-2120(80) does not cover patches, creams, and similar methods where the medication is merely absorbed into the skin rather than forced in. Those may still be exempt under a different part of § 12-36-2120 (for example, medicine sold by prescription — see RR #11-3), but not under the injectable-medication exemption.

This sits alongside RR #22-9 and PLR #22-1: the § 12-36-2120(80) exemption turns on (a) the drug being forced into the body and (b) administration in a physician's office (or CMS-certified kidney dialysis facility).

What this means for you

Makers of novel drug-delivery products

If your product forces the active ingredient into the body (even without a needle) and is administered in a physician's office, it can qualify as an exempt injectable medication under § 12-36-2120(80). If it works by absorption (patch, cream, lotion), it won't qualify under (80) — look to other exemptions like prescription medicine.

Physician practices buying these medications

Administration setting and delivery mechanism both matter. A forced-delivery medication used in your office can be exempt under (80); the same is not true for absorbed-through-the-skin products under that provision.

Everyone else

This is a private letter ruling tied to one product and one taxpayer's facts — only the requester may rely on it. Treat it as insight into the Department's reasoning, not as authority for a different product.

Common questions

Q: Does an "injection" require a needle to qualify for the exemption?
A: No. The Department held § 12-36-2120(80) doesn't limit the injection method; a product that chemically forces medication into the body qualifies, as would a jet injector.

Q: Are patches and creams exempt under this provision?
A: No. Delivery methods where the medication is merely absorbed (not forced in) are outside § 12-36-2120(80). They may qualify under a different exemption, such as prescription medicine (see RR #11-3).

Q: Where does the drug have to be administered?
A: In a physician's office, by or under the direct supervision of a physician (or in a CMS-certified kidney dialysis facility), as the exemption requires.

Q: Can my company rely on this ruling for a similar product?
A: No. A PLR binds the Department only as to the taxpayer who requested it. Your product and facts would need their own analysis.

Citations and references

Statutes:

• S.C. Code Ann. § 12-36-2120(80)(a) — exemption for injectable medications and biologics administered in a physician's office or a CMS-certified kidney dialysis facility

Cases (dictionary definitions of undefined statutory terms): Hay v. South Carolina Tax Commission, 273 S.C. 269, 255 S.E.2d 837 (1979); Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424 (1958); Etiwan Fertilizer Co. v. South Carolina Tax Commission, 217 S.C. 484, 60 S.E.2d 682 (1950).

Related Department guidance (described in prose, not linked): RR #22-9 (injectables in a hospital/surgery center not exempt under (80)); PLR #22-1 (allergen extracts exempt under (80)); RR #11-3 (broader discussion of § 12-36-2120 medical exemptions, including prescription medicine).

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR22-2.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE

300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC PRIVATE LETTER RULING #22-2
SUBJECT:

Chemically Injected Medication – Exemption in
Code Section 12-36-2120(80)
(Sales and Use Tax)

REFERENCES:

S.C. Code Ann. Section 12-36-2120(80) (2014)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific
taxpayer by the Department to apply principles of law to a specific set of
facts or a particular tax situation. It is the Department’s opinion limited to
the specific facts set forth, and is binding on agency personnel only with
respect to the person to whom it was issued and only until superseded or
modified by a change in statute, regulation, court decision, or another
Departmental advisory opinion, providing the representations made in the
request reflect an accurate statement of the material facts and the
transaction was carried out as proposed.

QUESTION:
Is the sale at retail of X, a pain medication administered as described in the facts, exempt from
the sales and use tax as an injectable medication under Code Section 12-36-2120(80)?
CONCLUSION:
Since the X pain medication, as described in the facts, is chemically forced (i.e., injected) below
the surface of the skin and is administered by a physician or other healthcare professional in a
medical office under the direct supervision of a physician, the sale at retail of X to a physician or
a physician’s practice is exempt from the sales and use tax as an injectable medication under
Code Section 12-36-2120(80).
FACTS:
ABC (“ABC”) is a pharmaceutical company that sells a non-opioid pain medication (hereinafter
“X”) used to treat individuals suffering from post-herpetic neuralgia and diabetic peripheral
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neuropathy. X is required to be administered by a physician, or other healthcare professional in a
medical office under the direct supervision of a physician.
X utilizes ABC’s proprietary X matrix system, which chemically delivers the medication directly
into the dermis layers below the surface of the skin exactly like syringe injections (i.e., below the
epidermis and stratum corneum layers of the skin) to deactivate nerve fibers and pain receptors.
The United States Food and Drug Administration does not consider X a “patch,” as it is
differentiated from over-the-counter and prescription patches in the market that are not required
to be applied by, or under the supervision of, a physician.
The delivery of X’s active ingredient below the surface of the skin occurs through the use of a
chemical carrier known as Z embedded in the matrix system’s microreservoir. Once the X matrix
system is applied to the skin, the chemical carrier permeates the skin, where the active ingredient
becomes supersaturated. Due to the supersaturation, the active ingredient is then forced through
the channels of the skin directly into the dermis. The way the matrix system forces a high
concentration of the active ingredient below the surface layers of the skin to deactivate nerve
fibers and pain receptors in such a short period of time is what makes X unique and different
from a patch.
If the compound used in X were applied directly to the skin without use of the matrix system, the
active ingredient would not be forced through the skin’s channels rapidly, and would instead
work more like a topical cream or lotion, ineffectively targeting the nerve fibers and pain
receptors in the dermis.
LAW AND ANALYSIS:
Code Section 12-36-2120(80)(a) exempts from sales and use tax the gross proceeds of sales and
sales price of:
… injectable medications and injectable biologics, so long as the medication or
biologic is administered by or pursuant to the supervision of a physician in an
office which is under the supervision of a physician, or in a Center for Medicare
or Medicaid Services (CMS) certified kidney dialysis facility. For purposes of this
exemption, “biologics” means the products that are applicable to the prevention,
treatment, or cure of a disease or condition of human beings and that are produced
using living organisms, materials derived from living organisms, or cellular,
subcellular, or molecular components of living organisms[.]
Since X is a medication used in the treatment of a disease, it must be determined if X is
“injected” by or pursuant to the supervision of a physician in an office which is under the
supervision of a physician.
It is an accepted practice in South Carolina to resort to the dictionary definition to determine the
literal meaning of a word used in statutes. For cases where this has been done, see Hay v. South
Carolina Tax Commission, 273 S.C. 269, 255 S.E.2d 837 (1979); Fennell v. South Carolina Tax
Commission, 233 S.C. 43, 103 S.E.2d 424 (1958); Etiwan Fertilizer Co. v. South Carolina Tax
Commission, 217 S.C. 484, 60 S.E.2d 682 (1950).
2

The Merriam-Webster Dictionary 1 provides, in part, the following definition for the word
“inject,” the basis for the word “injectable” as used in the exemption:
1a: to introduce into something forcefully // inject fuel into an engine
b: to force a fluid into (as for medical purposes) // inject a drug into the
bloodstream[.]
Based on the above, and for purposes of the exemption in Code Section 12-36-2120(80), an
injectable medication (or injectable biologic) is one in which a medication or biologic is
forcefully introduced into the body for medical purposes (e.g., treatment, prevention).
In the matter at hand, the physician uses the X matrix system. This system, as described in the
facts, chemically forces (i.e., injects) the active ingredient directly to nerve fibers and pain
receptors in the dermis. As stated in the facts, the United States Food and Drug Administration
does not consider X a “patch.”
While an injection typically uses a needle and a syringe, 2 the exemption statute does not limit the
injection method. However, Code Section 12-36-2120(80) does not apply to patches, creams,
and other similar methods of delivery in which the medication is not forced into the body, but
merely absorbed into the skin. 3
In conclusion, since the X pain medication is chemically forced (i.e., injected) below the surface
of the skin and is administered by a physician or other healthcare professional in a medical office
under the direct supervision of a physician, the sale at retail of X to a physician or a physician’s
practice is exempt from the sales and use tax as an injectable medication under Code Section 1236-2120(80).
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell

November 1
, 2022
Columbia, South Carolina

W. Hartley Powell, Director

CAVEAT: This advisory opinion is issued to the taxpayer requesting it on the assumption that the
taxpayer’s facts and circumstances, as stated, are correct. If the facts and circumstances given are
not correct, or if they change, then the taxpayer requesting the advisory opinion may not rely on it.
If the taxpayer relies on this advisory opinion, and the Department discovers, upon examination,
that the facts and circumstances are different in any material respect from the facts and
circumstances given in this advisory opinion, then the advisory opinion will not afford the taxpayer
any protection. It should be noted that subsequent to the publication of this advisory opinion,
changes in a statute, a regulation, or case law could void the advisory opinion.
Merriam-Webster online dictionary at https://www.merriam-webster.com/dictionary/inject (August 25, 2022).
For example, medicine can be injected by a “jet injector.”
3
While patches and creams do not qualify for the exemption under Code Section 12-36-2120(80), they may be
exempt under another provision of Code Section 12-36-2120 (e.g., medicine sold by prescription). For a discussion
of medical exemptions under Code Section 12-36-2120, see SC Revenue Ruling #11-3.
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