Did a Texas pharmacy need a doctor's prescription on file to sell diabetic test strips and lancets tax-free, and did that change in 2000?

Plain-English summary

A pharmacy customer complained that the pharmacy had been charging sales tax on diabetic testing supplies even though the pharmacy had the customer's doctor's prescription on file. The Comptroller's response confirmed the customer was right to question it, and laid out the rule as of March 2000, plus an imminent change:

• As therapeutic devices, diabetic test strips and lancets are exempt from Texas sales tax only when sold to an individual with a prescription from a licensed practitioner of the healing arts on file. Without a prescription, they're taxable. (Tex. Tax Code § 151.313 covers health care supplies.)
• If the pharmacy has the original prescription on file, it should not collect tax on those items — and if tax was collected anyway on a prescription purchase, the customer can either present the letter to the store for a refund or request a refund directly from the Comptroller (with copies of the actual receipts and prescriptions).
• A change was about to arrive for test strips specifically: Senate Bill 441, effective April 1, 2000, exempts blood glucose monitoring test strips without needing a prescription at all. That change did not extend to lancets, which still needed a prescription to be exempt.

What this means for you

Pharmacies selling diabetic testing supplies

Before April 1, 2000, both test strips and lancets required a prescription on file to be sold tax-free. From April 1, 2000 forward, test strips became exempt regardless of a prescription (under SB 441), while lancets continued to require a prescription for the exemption — don't assume the SB 441 change swept in every diabetic supply.

Diabetic patients who were charged tax in error

If you had a prescription on file and were still charged tax on test strips or lancets, you can seek a refund either from the retailer (using a letter like this one) or directly from the Comptroller's office, with your receipts and prescription.

Accountants and tax professionals

A good illustration of the "medical device exemption is prescription-gated" default rule under § 151.313, with a targeted legislative carve-out (SB 441) removing the prescription requirement for one specific item (blood glucose test strips) while leaving the general prescription rule intact for related items like lancets.

Common questions

Q: Were diabetic test strips and lancets tax-exempt without a prescription in Texas?
A: Before April 1, 2000, no — both needed a licensed practitioner's prescription on file to be exempt as therapeutic devices. Test strips changed on April 1, 2000, but lancets did not.

Q: What changed for blood glucose test strips on April 1, 2000?
A: Senate Bill 441 made them exempt without any prescription requirement.

Q: If I was charged tax on a prescription purchase, can I get a refund?
A: Yes — either from the store where you bought the item (by presenting a letter like this one) or directly from the Comptroller's office, with copies of your receipts and prescription.

Q: Can I rely on this letter for my own situation?
A: No. This opinion is based on the facts presented, and additional or different facts may change the opinion; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes:

• Tex. Tax Code § 151.313 (health care supplies exemption — prescription-gated for therapeutic devices)
• Senate Bill 441 (2000) (exempts blood glucose monitoring test strips without a prescription, effective 4/1/2000)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200003091L

Original ruling text

March 3, 2000

Dear **:

Thank you for your recent letter concerning the taxability of diabetic testing
supplies.

Your pharmacy has been collecting sales tax on diabetic testing supplies. The
pharmacy has a copy of your doctor' prescription on file. You asked that I
address the taxability of these supplies.

Response. As therapeutic devices, diabetic test strips and lancets are exempt
from tax when sold to an individual with a prescription from a licensed
practitioner of the healing arts. If your pharmacy has the original
prescription for these items on file, they should not collect tax on these
sales.

These items are taxable when purchased without a prescription.

If the items were purchased under a prescription, you may present this letter
to the store where the items were purchased and request a refund of the tax or
you may request a refund directly from this office. If you submit a request to
this office, please include copies of the actual receipts and prescriptions.

Texas Tax Code Section 151.313 covers health care supplies. I have enclosed a
copy for your reference.

Senate Bill 441, effective April 1, 2000, provides an exemption for blood
glucose monitoring test strips. A prescription will not be needed for the test
strips after April 1, 2000.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change. You may call me toll free at
1-800-531-5441, ext. 5-0613. The direct line is 512/475-0613. You may also
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Kevin Koller
Tax Policy Division