New Jersey: Human Drugs Prescribed for Animals Are Not Exempt
- Sales Tax News
- Mar 20, 2014 | Gail Cole
There are drugs used to treat human conditions and there are drugs used to treat animal conditions. Often these are different. However, some drugs may be used by both humans and animals. If such drugs have philosophical or existential implications, they also complicate taxes.
The New Jersey Division of Taxation recently issued a notice regarding the sale of prescription drugs used to treat animals. It reminds that while New Jersey allows an exemption from sales tax for prescription drugs “sold pursuant to a doctor’s prescription for human use,” it does not allow an exemption for the sale of drugs “sold pursuant to a veterinarian’s prescription to treat animals.”
In other words, the same prescribed drug is tax exempt when sold for human use and subject to sales tax when sold for animal use. Sorry, Fido.
The notice goes on to provide a definition of the word ‘”drug,” which does not include food and food ingredients, dietary supplements, or alcoholic beverages. Under N.J.S.A. 54:32B-8.1(b), a drug is “a compound, substance or preparation, and any component of a compound, substance or preparation, that is:
- Recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, and supplement to any of them; or
- Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or
- Intended to affect the structure or any function of the body.”
Tax should be collected by pharmacies and veterinarians on sales of drugs prescribed for animal use. Consumers who purchase such drugs without sales tax (through the internet or catalog) are required to pay use tax.
Collecting and remitting sales tax is a big job for businesses that sell into multiple jurisdictions, especially since states tax and exempt items differently. Alabama, for example, subjects drugs sold for animal use to sales tax, while California is considering an exemption for them.
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