Missouri Confirms that Sales of Prescription-Only Drugs Are Exempt

Tuesday, May 22nd, 2012


The Missouri Department of Revenue (DOR) recently released a pair of letter rulings confirming that sales of drugs that may only be dispensed under a prescription are exempt. Mo. Ltr. Rul. No. LR 7033 (Dept. of Revenue Feb. 9, 2012); Mo. Ltr. Rul. No. LR 7082 (Dept. of Revenue Apr. 13, 2012).

In the first of these letter rulings, LR 7033, the party that requested the ruling had produced a new prescription drug that it was selling directly to physicians for use in their practice. That drug has an active ingredient, is approved by the U.S. Food and Drug Administration (FDA), and is the same type of drug that may be sold to a licensed pharmacist for sale as a prescription drug. The issue in LR 7033 was whether sales of the drug to physicians are subject to sales tax.

In the second letter ruling, LR 7082, the party that requested the ruling sells a drug that is considered a controlled substance and is classified as a prescription pharmaceutical by the FDA. Under federal law this drug may only be sold by or on the order of a licensed healthcare practitioner, and FDA regulations require that the drug's packaging be labeled with "Rx Only." The issue in LR 7082 was whether sales of the drug are subject to sales tax. Thus, the issue in both letters was essentially the same: whether sales of drugs that may only be dispensed under a prescription are subject to Missouri's sales tax.

The answer in both rulings was the same; the sales of the prescription drugs are exempt. The DOR explained that Missouri exempts "sales of drugs which may be legally dispensed by a licensed pharmacist only upon a lawful prescription of a practitioner licensed to administer those items." Mo. Rev. Stat. sec. 144.030.2(18); see also Mo. Code Regs. tit. 12, sec. 10-110.013(1), (2)(B), (3)(A). In LR 7033, in which the drug was sold to a physician and then subsequently administered to a patient, the sales of the drug to the physician qualified for this exemption because the drug is of the type that may be sold by a licensed pharmacist as a prescription drug. Similarly, the DOR ruled that the drug discussed in LR 7082 qualified for this exemption because it may only be dispensed by or on the order of a licensed healthcare practitioner.

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