Is prescription pet food exempt from Virginia sales tax, and does a veterinarian have to pay sales tax when buying it to dispense to patients?

Plain-English summary

Virginia's Department of Taxation issued general guidance clarifying how sales tax applies to "prescription" pet food -- specialized food a veterinarian sells directly to a pet owner, or that a pet owner buys from another seller with a veterinarian's prescription, typically to manage a diagnosed condition like kidney or liver disease, obesity, or a cardiac or digestive problem. This is different from ordinary, over-the-counter pet food sold at any pet store or grocery store without a prescription.

Even though the FDA doesn't officially classify prescription pet food as a "drug," the Department treats it the same as a prescription medicine for sales tax purposes, because it functions the same way: a veterinarian prescribes or dispenses it during an examination specifically to treat a diagnosed illness, and it generally can't be purchased from a third-party seller without that prescription. Virginia's general exemption for medicines and drugs sold on a valid prescription (Va. Code § 58.1-609.10) covers items sold this way by veterinarians, pharmacies, pet stores, and other sellers.

The guidance also flagged an important, temporary change in the law affecting veterinarians' own purchases. Before July 1, 2022, a veterinarian who dispensed or sold prescription medicines and drugs, including this pet food, was legally treated as the "user or consumer" of everything it purchased for that purpose, meaning the vet itself had to pay sales tax on buying the medicine, even though the medicine was ultimately exempt when resold or dispensed to the patient. A 2022 law change reversed that rule for a limited window: from July 1, 2022 through July 1, 2025, veterinarians are exempt from sales tax on their own purchases of prescription medicines and drugs administered or dispensed within a genuine veterinarian-client-patient relationship. That temporary exemption applies to prescription pet food purchases by veterinarians just like any other prescription medicine.

What this means for you

Veterinary practices, pharmacies, and pet stores selling prescription pet food

Treat prescription pet food, food sold directly by a vet or purchased elsewhere on a vet's prescription for a diagnosed condition, the same as any other prescription medicine: it's exempt from Virginia sales tax when sold to the end customer.

Veterinarians purchasing prescription medicines, drugs, or prescription pet food for their own practice

From July 1, 2022 through July 1, 2025, you don't have to pay sales tax on your own purchases of prescription medicines and drugs, including prescription pet food, that you administer or dispense within a veterinarian-client-patient relationship. Before this window opened, and again after it closes unless extended, veterinarians are treated as the taxable end user of such purchases.

Pet owners with questions about why a specialty pet food purchase wasn't taxed

If your veterinarian prescribed a specific food for a diagnosed condition, and you bought it either directly from the vet or from another seller using that prescription, it's legitimately exempt from sales tax under Virginia's medicines-and-drugs exemption -- this isn't a billing error.

Common questions

Q: Is all pet food exempt from Virginia sales tax?
A: No -- only "prescription" pet food, sold by a veterinarian or purchased elsewhere with a veterinarian's prescription to treat a diagnosed condition, is treated as exempt. Ordinary over-the-counter pet food remains taxable.

Q: Does the FDA need to classify pet food as a "drug" for it to qualify for this exemption?
A: No -- the Department treats prescription pet food as an exempt prescription medicine based on how it's prescribed and used, to treat a diagnosed condition, requiring a veterinarian's prescription, regardless of the FDA's formal drug classification.

Q: Do veterinarians have to pay sales tax on medicines and drugs they buy for their own practice?
A: From July 1, 2022 through July 1, 2025, no, as long as the medicines and drugs are administered or dispensed within a veterinarian-client-patient relationship; before and after that window, absent further legislative action, veterinarians are treated as the taxable consumer of such purchases.

Citations and references

• Va. Code § 58.1-609.10 (exemption for prescription medicines and drugs)
• 2022 Acts of Assembly, Chapters 551 and 552 (House Bill 551 / Senate Bill 517) (temporary veterinarian purchase exemption, July 1, 2022 - July 1, 2025)

Subject

Exemption: Drugs and Medicine - Prescription Pet Food

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-159

Original ruling text

December 20, 2022

Dear *,

This is in response to your request for guidance regarding the Retail Sales and Use Tax treatment of prescription pet food.

DISCUSSION

Under existing policy, prescription pet foods are treated as prescription medicines for the purposes of the Retail Sales and Use Tax. Prescription pet foods can be purchased in one of two ways: 1) through sale by a veterinarian; or 2) with a prescription provided by a veterinarian. Veterinarians usually prescribe or sell these foods to customers when their pets have been diagnosed with a specific disease, such as liver or kidney disease, or to correct problems such as obesity, cardiac, or digestive problems. They are prescribed during the course of a physical examination. By contrast, nonprescription pet foods are available over the counter (“OTC”), and can be purchased at pet stores and grocery stores alike. Because veterinarians typically prescribe or suggest the use of prescription pet foods for treatment of various diseases or to correct pet illnesses and because they require a veterinarian’s prescription in order to purchase from a third party vendor, they should be treated as prescription medicines, even though the United States Food and Drug Administration (the “FDA”) does not specifically classify these items as drugs.

Medications and other prescription products sold by veterinarians, pharmacies, pet stores, and other sellers on a veterinarian’s prescription are exempt from the Retail Sales and Use Tax under Va. Code § 58.1-609.10. Prior to July 1, 2022, however, veterinarians dispensing or selling medicines or drugs on prescription were deemed to be the user or consumer of all such medicines and drugs, and were required to pay Retail Sales and Use Tax on such purchases unless the medicines and drugs were used or consumed directly in the care, medication, and treatment of agricultural production animals or for resale to a farmer for direct use in producing an agricultural product for market.

Legislation passed during the 2022 General Assembly session, House Bill 551 and Senate Bill 517 (2022 Acts of Assembly , Chapters 551 and 552) amended Va. Code § 58.1-609.10 to exempt veterinarians from Retail Sales and Use Tax on their purchases of prescription medicines and drugs that are administered or dispensed to patients within a veterinarian-client-patient relationship beginning July 1, 2022, and ending July 1, 2025. The legislation also repealed the provision of law that provided that a veterinarian dispensing or selling medicines or drugs on prescription is deemed to be the user or consumer of all such medicines and drugs.

CONCLUSION

In conclusion, prescription pet food sold on a veterinarian’s prescription or administered or dispensed to patients within a veterinarian-client-patient relationship is entitled to the Retail Sales and Use Tax exemption under Va. Code § 58.1-609.10. This exemption also applies to the purchase of the prescription pet food by the veterinarian.

I hope the above information responds to your inquiry. Should you have any additional questions about this ruling, you may contact * in the Office of Policy Development at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

CMB/sk