Does the April 1, 2000 over-the-counter drugs and medicines exemption relieve a direct sales organization from collecting sales tax on vitamin, mineral, and dietary supplement sales?

Plain-English summary

A direct sales/multi-level marketing company wrote to the Comptroller about the newly effective (April 1, 2000) exemption for over-the-counter drugs and medicines, asking whether it applies to its vitamin, mineral, and dietary supplement sales. The Comptroller confirmed: effective April 1, 2000, sales of over-the-counter drugs and medicines are exempt from Texas sales tax. A qualifying product must be a "drug or medicine" — an article or substance intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or suffering.

Retailers, including direct sales organizations, are no longer required to collect sales tax on sales of vitamins, minerals, and dietary food supplements. The letter gives herbal dietary supplements taken for weight loss or other medicinal purposes as a specific example of what qualifies, and encloses a copy of the Comptroller's bulletin explaining the exemption.

What this means for you

Direct sales and multi-level marketing companies selling supplements

You're not required to collect sales tax on vitamins, minerals, or dietary food supplements sold on or after April 1, 2000, as long as the product is a "drug or medicine" under this definition — this applies to your direct sales/distributor channel the same as any other retailer.

Accountants and tax professionals

A short, general confirmation letter — useful as a citable Comptroller statement that the April 2000 OTC exemption expressly extends to the direct sales/MLM distribution channel, not just traditional retail.

Common questions

Q: Does the OTC drugs and medicines exemption apply to direct sales/MLM companies?
A: Yes. Retailers, including direct sales organizations, no longer need to collect sales tax on qualifying vitamins, minerals, and dietary food supplements sold on or after April 1, 2000.

Q: What makes a product a "drug or medicine" for this exemption?
A: An article or substance intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or suffering.

Q: Can I rely on this letter for my own company's products?
A: No. This opinion is based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

No Texas Tax Code section or administrative rule is cited by number in the original letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200004168L

Original ruling text

April 4, 2000

Dear **:

Thank you for your letter concerning the exemption of over-the-counter drugs
and medicines.

Effective April 1, 2000, sales of over-the-counter drugs and medicines are
exempt. To qualify for this exemption, a product must be a drug or medicine,
which is an article or substance intended for use in the diagnosis, cure,
mitigation, treatment, or prevention of disease or suffering.

Retailers (including direct sales organizations such as COMPANY A) are no
longer required to collect sales tax on sales of vitamins, minerals, and
dietary food supplements. As an example, herbal dietary supplements taken for
weight loss or for other medicinal purposes are exempt. A copy of the bulletin
explaining the exemption of over-the-counter drugs and medicines is enclosed.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

I hope this information helps. You may call me toll free at 1-800-531-5441,
ext. 5-0030. The direct line is 512/475-0030. You may also write to Tax
Policy, Comptroller of Public Accounts.

Sincerely,

David Somerville
Tax Policy Division