Are injectable medications and injectable biologics sold for use in a hospital or an independent surgery center exempt from South Carolina sales and use tax under Code Section 12-36-2120(80)?

Plain-English summary

South Carolina exempts some injectable drugs from sales and use tax, but the exemption is narrower than it might seem. SC Revenue Ruling #22-9 holds that the exemption in Code § 12-36-2120(80) for injectable medications and injectable biologics does not cover drugs bought for use in a hospital or an independent surgery center.

The reason is the exact wording of the exemption. Section 12-36-2120(80) exempts injectable medications and biologics only when the drug 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." A hospital and a surgery center are neither a physician's "office" nor a kidney dialysis facility.

The Department applied two long-standing rules of construction:

• Expressio unius est exclusio alterius — when a statute lists specific things (here, a physician's office and a CMS-certified kidney dialysis facility), the listing implies that everything not listed is excluded (Pennsylvania National Mutual Casualty Insurance Co. v. Montgomery).
• Exemptions are construed strictly against the taxpayer — exemption language is given its plain, ordinary meaning and read narrowly (Hollingsworth on Wheels, Inc. v. Greenville County Treasurer).

The Department noted that if the General Assembly had wanted the exemption to reach hospitals and surgery centers, it could have said so, or dropped the location requirement entirely.

A crucial caveat: the ruling only addresses § 12-36-2120(80). The same drug may still be exempt under a different provision. In particular, § 12-36-2120(28)(a) exempts prescription medicines and therapeutic radiopharmaceuticals "used in the treatment of rheumatoid arthritis, cancer, lymphoma, leukemia, or related diseases," and prescription medicines used to relieve the effects of that treatment — wherever they are administered. So a chemotherapy injection given in a hospital can still be exempt, just under (28)(a) rather than (80).

What this means for you

Hospitals and independent surgery centers

Don't assume every injectable is tax-free. The § 12-36-2120(80) exemption (physician's office / kidney dialysis facility) does not apply to your purchases. Tax them unless a different exemption — most importantly the (28)(a) exemption for prescription cancer/arthritis/leukemia drugs and therapeutic radiopharmaceuticals — actually fits the specific drug.

Physician offices and CMS-certified kidney dialysis facilities

You are the settings the § 12-36-2120(80) exemption was written for. Injectable medications and biologics administered by or under a physician's supervision in your office (or in a certified kidney dialysis facility) remain exempt under (80).

Suppliers, distributors, and pharmacies

Where the drug will be administered controls the (80) exemption. Track whether the buyer is a physician's office / dialysis facility (potentially exempt under (80)) versus a hospital or surgery center (not exempt under (80), but possibly exempt under (28)(a) if it's a qualifying prescription oncology/arthritis drug or radiopharmaceutical).

Common questions

Q: We're a hospital. Are our injectable drugs tax-exempt?
A: Not under Code § 12-36-2120(80) — that exemption is limited to a physician's office or a CMS-certified kidney dialysis facility. A given drug may still be exempt under another provision, such as § 12-36-2120(28)(a).

Q: Why does the location matter so much?
A: Because the exemption statute names specific locations. Courts read a list of specific items as excluding what's left off (expressio unius), and they construe tax exemptions strictly against the claimed exemption.

Q: What about a chemotherapy injection given in a hospital?
A: It can still be exempt — under § 12-36-2120(28)(a), which exempts prescription medicines and therapeutic radiopharmaceuticals used to treat cancer, lymphoma, leukemia, rheumatoid arthritis, or related diseases, regardless of where administered.

Q: Does this exemption cover the same drug in a physician's office?
A: Yes. Administered by or under a physician's supervision in a physician's office (or a CMS-certified kidney dialysis facility), the injectable medication or biologic is exempt under § 12-36-2120(80).

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 (defines "biologics")
• S.C. Code Ann. § 12-36-2120(28)(a) — exemption for prescription medicines and therapeutic radiopharmaceuticals used to treat cancer, lymphoma, leukemia, rheumatoid arthritis, or related diseases, or to relieve the effects of such treatment

Cases:

• Pennsylvania National Mutual Casualty Insurance Co. v. Montgomery, 282 S.C. 546, 320 S.E.2d 458 (Ct. App. 1984) — expressio unius est exclusio alterius
• Hollingsworth on Wheels, Inc. v. Greenville County Treasurer, 276 S.C. 314, 278 S.E.2d 340 (1981) — tax exemptions are strictly construed against the claimed exemption

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR22-9.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 REVENUE RULING #22-9
SUBJECT:

Injectable Medications and Injectable Biologics Sold to Hospitals
and Independent Surgery Centers - Exemption in Code Section
12-36-2120(80)
(Sales and Use Tax)

EFFECTIVE DATE:

All periods open under the statute.

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)
S.C. Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public. It is an advisory opinion issued to apply principles of tax
law to a set of facts or general category of taxpayers. It is the
Department’s position until superseded or modified by a change in
statute, regulation, court decision, or another Department advisory
opinion.

PURPOSE:
The purpose of this advisory opinion is to address the application of the sales and use tax
exemption for injectable medications and injectable biologics in Code Section 12-36-2120(80)
that are administered by or pursuant to the supervision of a physician in a hospital or an
independent surgical center.
QUESTIONS:

1. Is the sale at retail of an injectable medication or injectable biologic for use in a hospital
   exempt from the sales and use tax under Code Section 12-36-2120(80)?
2. Is the sale at retail of an injectable medication or injectable biologic for use in an
   independent surgery center exempt from the sales and use tax under Code Section 12-362120(80)?

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CONCLUSIONS:

1. The sale at retail of an injectable medication or injectable biologic for use in a hospital is not
   exempt from the sales and use tax under Code Section 12-36-2120(80).
   2.

The sale at retail of an injectable medication or injectable biologic for use in an independent
surgery center is not exempt from the sales and use tax under Code Section 12-36-2120(80).

Note: While the injectable medication or injectable biologic is not exempt under Code Section
12-36-2120(80) when sold for use in a hospital or an independent surgery center, it may be
exempt under another provision of Code Section 12-36-2120. For example, if the injectable
medication or injectable biologic is a prescription medicine and therapeutic radiopharmaceutical
“used in the treatment of rheumatoid arthritis, cancer, lymphoma, leukemia, or related diseases,”
or a prescription medicine “used to relieve the effects of any such treatment,” then the the
injectable medication or injectable biologic is exempt from the tax under Code Section 12-362120(28)(a).
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[.]
The exemption statute specifically requires that the injectable medication or injectable biologic
be administered “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.”
The question at hand is whether the exemption is applicable to injectable medication or
injectable biologic administered in a hospital or in an independent surgical center.
In Pennsylvania National Mutual Casualty Insurance Co. v. Montgomery, 282 S.C. 546, 320
S.E.2d 458 (Ct. App. 1984), the South Carolina Court of Appeals held:
A well-established rule of statutory construction is “expressio unius est exclusio
alterius,” which means that the enumeration of particular things excludes the idea
of something else not mentioned. Under the rule, exceptions made in a statute
give rise to a strong inference that no other exceptions were intended.
Furthermore, the South Carolina Supreme Court held in Hollingsworth on Wheels, Inc. v.
Greenville County Treasurer, 276 S.C. 314, 278 S.E.2d 340 (1981), that the language of a tax
exemption statute must be given its plain, ordinary meaning and must be strictly construed
against the claimed exemption.
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Based on the above, the enumeration of an “office” and a “CMS certified kidney dialysis
facility” in the exemption statute excludes the idea of something else not mentioned, such as a
hospital or an independent surgical center. In addition, the language of a tax exemption statute
must be given its plain, ordinary meaning and, with respect to this exemption, must be strictly
construed so as to limit the exemption to injectable medication and injectable biologics
administered “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.” If the General
Assembly intended for this exemption to apply to hospitals and independent surgical centers,
they could have listed such places in the exemption or could have exempted injectable
medication or injectable biologics administered by or pursuant to a physician without listing a
specific location for the treatment.
In conclusion, the sale at retail of an injectable medication or injectable biologic for use in a
hospital or an independent surgery center, is not exempt from the sales and use tax under Code
Section 12-36-2120(80).
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
October 20
, 2022
Columbia, South Carolina

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