Could a physician's verbal order or a signed health-care referral count as a prescription for exempt therapeutic items?

Plain-English summary

A physician owned all outstanding stock of a Class D pharmacy located in the same building as the physician's office. Because a pharmacist was not always present, the physician explained that pharmacy rules prohibited an ordinary written or oral prescription in that setting, even though some items required the physician's verbal authorization.

The physician also described purchases by members of a nearby health-care provider. Each purchase came with a form naming the individual and requested items and bearing a doctor's signature.

After discussing both situations with State Board of Pharmacy personnel, the Comptroller concluded that the physician's verbal orders and the submitted health-care referrals constituted prescriptions. Under those circumstances, the seller did not have to charge tax on therapeutic appliances, devices, and related supplies specifically designed for those products.

The answer was limited to the described arrangements and forms; it does not establish that every verbal instruction or referral document qualifies.

Common questions

Did the Comptroller require a conventional written prescription here? No. It accepted the described verbal orders and signed referral forms. Did the conclusion cover every pharmacy sale? No. The response addressed the specified therapeutic appliances, devices, and related supplies under the two stated fact patterns. Was the State Board of Pharmacy consulted? Yes, according to the response.

Citations and references

• Rule 3.284, paragraph 10(c)(6), as cited in the reproduced request.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8504L0642A06

Original ruling text

April 29, 1985

Dear ***:

Thank you for your recent letter which I have restated with response
below.

I have been asked by the manager of the LOCATION, *** to address
this question to you.

COMPANY A, a Class D pharmacy under the laws of the State of Texas,
licensed by the State Board of Pharmacy, is physically located within
the building which I own and in which I have my offices as a licensed
physician in the State of Texas, Texas State Board of Medical Examiners
license ***. I control all of the outstanding shares of stock
of COMPANY A and, due to its close proximity of my office, the majority
of sales in the store are made to my patients. Under the regulations of
a Class D pharmacy, certain items must have my verbal authorization for
sale however, due to the specifics of the license, because a pharmacists
is not in attendance at all times, a written or oral prescription is
expressly forbidden by the State Board of Pharmacy regulations. Therefore,
to comply with Rule 3.284, paragraph 10 subsection C subsection 6,
having a prescription, either oral or written would put me in direct
conflict with the State Board of Pharmacy regulations.

It is obviously the intent of Rule 3.284 that certain items sold by
prescription be exempt from sales tax, however, not having a prescription
would then force the collection of sales tax when, legally, from another
state agency, a prescription is illegal. I therefore request an
exemption from this requirement as long as these "therapeutic appliances,
device and related supplies specifically designed for (these) products"
are ordered ("prescribed") by me for my patients and that they be exempt
from sales tax.

Another problem has arisen due to our contractual relationship with a
major purveyor of health care located on our block, HEALTHCARE X. Each
of the purchases made by members of HEALTHCARE X are accompanied by a
request form which has on it the name of the individual, the items required,
and a doctor's signature. Under the regulations of the Texas Board of
Medical Examiners, and the Texas State Board of Pharmacy, these are the
only requirements that a paper be considered a prescription.

We believe that having accepted this form is adequate to satisfy the
regulation of sub-paragraph 6 alluded to above. A copy of this form is
enclosed with the appropriate portions marked for your understanding.

I realize that this request may be somewhat unusual, however, it follows
the previously unknown implementation of Rule 3.284 which had not been
previously received until *** brought it to my attention. We
believe that we have been in total compliance with this rule in the past
and would like your opinion to allow us to continue to serve the diabetic
effectively so that the diabetic population in the State of Texas does
not have an extra, possibly unnecessary, cost added to them.

Response: I have discussed both fact situations which personnel from the
State Board of Pharmacy and determined that both your verbal orders and
HEALTHCARE X referral, as submitted, constitute prescriptions. Under these
circumstances, you will not be required to charge tax when selling therapeutic
appliances, devices and related supplies specifically designed for those
products.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division