Our veterinary hospital buys large quantities of Dulbecco's Phosphate Buffered Saline to flush and transfer 7-day equine embryos from a donor mare to a surrogate mare (a well-established procedure called Equine Embryo Transfer). Is this product exempt from Texas sales tax?

Plain-English summary

A veterinary hospital purchased large quantities of "Dulbecco's Phosphate Buffered Saline" to perform Equine Embryo Transfer — a well-established (not experimental) equine veterinary procedure in which a 7-day-old embryo is flushed from a donor mare and transferred into a surrogate mare. The hospital couldn't find any existing Comptroller rule addressing this specific product and use, so it asked for a ruling on the product's tax status.

After discussing the use with the taxpayer, the Comptroller determined that using Dulbecco's Phosphate Buffered Saline as the transfer medium between mares reduces disease transmission during the procedure — and on that basis, the product qualifies as a drug or medicine. Because Texas exempts drugs and medicines dispensed by a licensed practitioner of the healing arts (which includes veterinarians) from sales tax, the saline used in this equine embryo transfer procedure is exempt.

What this means for you

Equine veterinary practices performing embryo transfer procedures

Saline solution used specifically as a disease-reducing transfer medium in embryo transfer procedures can qualify for the drug/medicine sales tax exemption when dispensed by a licensed veterinarian — even for a product with no dedicated Comptroller rule addressing it by name.

Veterinary hospitals and clinics buying specialty medical supplies without a specific existing rule

This letter shows the Comptroller is willing to classify a novel product under an existing exemption category (drugs/medicines dispensed by a licensed healing-arts practitioner) based on its actual medical function, rather than requiring a new rule to be written for every specific product.

Accountants and tax professionals advising veterinary practices

The controlling test here is functional: does the product serve a genuine medical/therapeutic purpose (here, reducing disease transmission) when dispensed by a licensed veterinarian? That functional analysis, not a product-specific rule, is what supports exempt treatment.

Common questions

Q: Is saline solution used in veterinary embryo transfer procedures exempt from Texas sales tax?
A: Yes, when it qualifies as a drug or medicine (here, because it reduces disease transmission during the transfer) and is dispensed by a licensed veterinarian.

Q: Does it matter that there's no specific Comptroller rule mentioning this product?
A: No — the Comptroller classified it based on its actual medical function under the existing drug/medicine exemption for licensed healing-arts practitioners, rather than requiring a dedicated rule.

Q: Can I rely on this letter for my own veterinary practice's supply purchases?
A: No. This opinion is rendered based on the facts presented, and if there are additional or different facts, the opinion may change; it can be relied on only by the taxpayer it was issued to.

Citations and references

No specific Tax Code section or Comptroller rule number is cited in this letter; the Comptroller applies the general drug/medicine exemption for items dispensed by a licensed practitioner of the healing arts without quoting a statute or rule number in the response.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9901072L

Original ruling text

January 13, 1999

Dear Ms. **:

Thank you for your recent letter which is restated in part with response below.

Our hospital is purchasing in large quantities a product called "Dulbecco's
Phosphate Buffered Saline" from ** in ****, MO. This
particular product is being used by our veterinarians for the flushing of
equine embryos. The procedure herein referred to as Equine Embryo Transfer.
This is a medical maneuver in which a 7-day embryo is flushed from one mare and
transferred into a surrogate mare. This is not an experimental procedure, nor a
laboratory process, but one that is well established in the equine veterinary
community.

I would like for you to establish a ruling on the tax status of this product
based on our usage. There is no current rule that I can find in which this
situation is mentioned.

Response: As we discussed in our telephone conversation of January 13, 1999,
your firm uses the product as a medium to transfer the embryos from the donor
to the surrogate mare. Our research indicates that the use of Dulbecco's
Phosphate Buffered Saline as a medium to transfer embryos between mares reduces
disease transmission and so qualifies as a drug or medicine. Drugs and
medicines dispensed by a licensed practitioner of the healing arts, such as a
veterinarian, are exempt from sales tax.

This opinion is rendered 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. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division