Were bulk sales of the Mirena intrauterine contraceptive to licensed physicians, hospitals, and clinics exempt from Virginia sales tax?

Subject

Bulk Mirena sales to licensed medical providers were exempt

Plain-English summary

Virginia ruled that a wholesale distributor could sell Mirena without sales tax to licensed physicians, hospitals, and clinics. Mirena was an intrauterine contraceptive device that released levonorgestrel and was classified as a Schedule VI controlled drug.

The professional-practice exemption covered purchases by licensed physicians, optometrists, nurse practitioners, and physician assistants for use in their practices, including qualifying professional business forms.

The institutional exemption separately covered medicines and drugs bought for use or consumption by licensed hospitals, nursing homes, clinics, and similar corporations. Nonprofit status was not required; licensed for-profit hospitals and clinics also qualified.

What this means for you

• The product's controlled-drug classification drove the exemption.
• Professional-practice purchases by the listed licensed providers qualified.
• Licensed hospitals and clinics qualified whether nonprofit or for-profit.
• Current classification and exemption documentation should be confirmed.

Common questions

Was Mirena treated as medical equipment or a controlled drug?

A controlled drug under the ruling.

Did a hospital have to be nonprofit?

No.

Could the wholesaler sell tax-free to a licensed physician's practice?

Yes, for use in the professional practice.

Citations and references

• Va. Code § 58.1-609.10(9).
• Virginia Public Document 09-127.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-185

Original ruling text

December 11, 2009

Re: Ruling Request: Retail Sales and Use Tax

Dear ***:

This will respond to your letter in which you request a ruling on the application of the retail sales and use tax to the sale of a product sold by * (the “Taxpayer”). I apologize for the delay in responding to your letter.

FACTS

The TP is a wholesale distributor of the product Mirena, an intrauterine contraceptive device (IUD). Mirena slowly releases a chemical agent levonorgestrel into the body that causes contraceptive effects. Mirena is classified by the Virginia Board of Pharmacy as a Schedule VI Legend Drug under Va. Code § 58.1-3455 (3). The TP seeks a ruling on the application of the tax to bulk sales of Mirena to licensed physicians, hospitals, and clinics.

RULING

Physicians

Virginia Code § 58.1-609.10 9 provides, in pertinent part, that the retail sales and use tax does not apply to:

Controlled drugs purchased for use by a licensed physician, optometrist, licensed nurse practitioner, or licensed physician assistant in his professional practice, regardless of whether such practice is organized as a sole proprietorship, partnership, or professional corporation, or any other type of corporation in which the shareholders and operators are all licensed physicians, optometrists, licensed nurse practitioners, or licensed physician assistants engaged in the practice of medicine, optometry, or nursing. . . .

The Department recently addressed the taxability of the IUD Mirena in Public Document (P.D. 09-127) (8/24/09). Based on this ruling, Mirena constitutes a controlled drug as described in Schedule VI of the Virginia Drug Control Act and is exempt from the sales and use tax pursuant to Va. Code § 58.1-609.10 9 when purchased for use by a licensed physician, optometrist, licensed nurse practitioner, or licensed physician assistant in his professional practice. Accordingly, the Taxpayer may sell Mirena to licensed physicians exempt of the tax for use in their professional practice.

Hospitals and Clinics

Virginia Code § 58.1-609.10 9 also provides, in pertinent part, that the retail sales and use tax does not apply to “[m]edicines and drugs purchased for use or consumption by a licensed hospital, nursing home, clinic, or similar corporation not otherwise exempt under this section. . . .” Pursuant to Va. Code § 58.1-609.10 9, the Taxpayer may sell Mirena exempt of the tax to licensed hospitals and clinics, regardless of whether such entities are nonprofit or for profit.

This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this ruling, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at **.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2671637855.T