Does Texas sales tax apply to the sale of a prescription drug discount card?

Plain-English summary

A company planned to sell a "20% Prescription Discount Card" in Texas — a card that would save the purchaser money on prescription medication only, sold for $24.95 plus $3.00 shipping and handling per year per household, and usable mainly at chain-store pharmacies and some independent pharmacies. The company asked the Comptroller whether it owed Texas sales tax on selling these cards.

The Comptroller's Tax Administration Division answered that the sale of the card itself is not taxable, because it is "the sale of an intangible" — the purchaser is really buying the right to a future discount, not a piece of tangible personal property. However, the company still owes Texas sales or use tax on its own cost of the physical materials and the printing or imprinting of the cards, since those are tangible items the company uses in Texas.

The letter notes this answer is based on the facts presented, and that other facts, though similar, may produce a different result.

What this means for you

Businesses selling discount cards or memberships

If you sell a card, membership, or similar product whose real value is an intangible right (like a discount on future purchases) rather than the physical object itself, this letter shows the Comptroller's reasoning: the sale of that intangible right is not subject to Texas sales tax. But you don't get a free pass on the physical card — you're treated as the end user of the card stock and printing, so you owe sales or use tax on what it costs you to produce or acquire the cards.

Pharmacies and healthcare-adjacent sellers

This particular ruling involved a prescription discount card usable at pharmacies, but the holding turns on the "sale of an intangible" characterization, not on anything specific to prescriptions or healthcare.

Accountants and tax professionals

Because this is a 1993 letter with no statutory citations at all in the response, it's a bare application of the general "sale of an intangible is not a taxable sale of tangible personal property" principle, paired with the standard rule that a seller of imprinted promotional/administrative materials owes tax on its own cost of those materials. Treat it as illustrative of that reasoning rather than as citing controlling authority you can point to directly.

Common questions

Q: Does the company have to charge sales tax on the $24.95 discount cards?
A: No. The Comptroller ruled the sale of the card is the sale of an intangible and is not taxable.

Q: Does the company owe any Texas tax at all in this transaction?
A: Yes — its own cost of the materials and the printing or imprinting of the cards, since it is using those tangible items in Texas.

Q: Does this ruling apply to any discount card sold anywhere?
A: Not automatically. The letter itself says the opinion is based on the facts presented, and other facts, though similar, may provide a different result. It's also binding only on the taxpayer who received it.

Q: What statutes or rules does this ruling cite?
A: None. The original letter contains no statutory or rule citations — it's a short, direct response applying the general sale-of-an-intangible concept to this fact pattern.

Citations and references

No statutes or rules are cited in the original ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9304L1232C13

Original ruling text

April 5, 1993

Dear ****:

This is in response to your recent letter concerning the taxability
of a 20% Prescription Discount Card that your company will be selling
in Texas.

SITUATION

The cards will be sold for $24.95 plus $3.00 shipping and handling, per
year, per household and will save purchasers money on their prescription
medication only. You will primarily contract with chain store pharmacies
and to a lesser extent with smaller independent pharmacies.

RESPONSE

The sale of the card allowing the purchaser a discount on prescription
drugs is the sale of an intangible and is not taxable. You should pay
Texas sales or use tax on your cost of materials and printing or
imprinting the cards for use in Texas.

This opinion is based on the facts presented. Other facts though similar
may provide a different result.

If you have other questions or need more information, you may call me at
1-800-531-5441, extension 3-4502. The regular number is 512/463-4600.
You may also write to Tax Administration Division at the above address.

Sincerely,

Gilbert Zamora
Tax Administration Division