Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.5 - Prescription Drugs

Current through Register Vol. 47, No. 3, July 24, 2024
The sales price from the sale of prescription drugs dispensed
				  for human use or consumption in accordance with subrules 220.5(3) and 220.5(4)
				  shall be exempt from tax. The sales price from the sale of oxygen or insulin
				  purchased for human use or consumption (whether or not the oxygen or insulin is
				  prescribed) is exempt from tax as a prescription drug.
(1)
Ultimate user.
The term
				"ultimate user" means an individual who has lawfully obtained and possesses a
				prescription drug or medical device for the individual's own use or for the use
				of a member of the individual's household, or an individual to whom a
				prescription drug or medical device has been lawfully supplied, administered,
				dispensed or prescribed. The term is limited to natural persons, and does not
				include any legal persons such as corporations.
(2)
Tax exemption.
The sale
				of a prescription drug is exempt from tax only if the drug is intended to be
				prescribed or dispensed to an ultimate user. A drug is intended to be
				prescribed or dispensed to an ultimate user only if the drug is obtained by or
				supplied or administered to an ultimate user for placement on or in the
				ultimate user's body.
EXAMPLE A: A physician prescribes a tranquilizer for a
				  patient who is chronically nervous. The patient uses the prescription to
				  purchase the tranquilizer at a pharmacy. The purchase is exempt from
				  tax.
For purposes of this subrule, any drug prescribed in writing
				  by a licensed physician, surgeon, osteopath, osteopathic physician or surgeon,
				  or other person authorized by law to an ultimate user for human use or
				  consumption shall be deemed a drug exempt from tax if a prescription is
				  required or permitted under Iowa state or federal law.
EXAMPLE B: A common painkiller is sold over the counter in
				  doses of 200 milligrams per tablet. In doses of 600 milligrams per tablet,
				  federal law requires a prescription before the drug can be dispensed. Sales of
				  600 milligram tablets by prescription are exempt from tax.
EXAMPLE C: A federal law permits but does not require the
				  painkiller mentioned in Example B to be prescribed by a practitioner in dosages
				  of 200 milligrams per tablet. A practitioner might prescribe the painkiller in
				  the over-the-counter dosage, for example, to impress upon a patient the
				  importance of taking the drug. Sales of 200 milligram tablets by prescription
				  are exempt from tax.
(3)
Persons authorized to dispense prescription drugs.
In order
				for a prescription drug or device to qualify for an exemption, it must be
				dispensed by anyone authorized under Iowa law to dispense prescription drugs or
				devices in this state or by anyone licensed in another state in a health field
				in which, under Iowa law, licensees in this state may legally prescribe drugs
				or devices.
(4)
Disposition
				of prescription drugs.
Prescription drugs may be dispensed either
				directly from one of the persons licensed in subrule 220.5(3) who may also
				prescribe drugs or by a pharmacist upon receipt of a prescription from one of
				the persons licensed to prescribe. A prescription received by a licensed
				pharmacist from one of the persons licensed in subrule 220.5(3) who may also
				prescribe drugs shall be sufficient evidence that a drug is exempt from tax.
				When a person who prescribes a drug is also the dispenser, the drug will not
				require a prescription by such person, but the drug must be recorded as if a
				prescription would have been issued or required. If this condition is met, the
				sales price from the sale of the drug is exempt from tax.
(5)
Others required to collect sales
				tax.
Any person other than those who are allowed to dispense drugs or
				devices under subrule 220.5(3) is required to collect sales tax on any
				prescription drugs.
(6)
Prescription drugs purchased by hospitals for resale.
This
				subrule applies to for-profit hospitals only. Hospitals have purchased
				prescription drugs for resale to patients and not for use or consumption in
				providing hospital services only if the following circumstances exist:
(1) the drug is actually transferred to the
				patient;
(2) the drug is transferred
				in a form or quantity capable of a fixed or definite price value;
(3) the hospital and the patient intend the
				transfer to be a sale; and
(4) the
				sale is evidenced in the patient's bill by a separate charge for the
				identifiable drug.
A hospital's purchase of a prescription drug for purposes
				  other than resale will still be exempt from tax if a drug is intended to be
				  prescribed to an ultimate user and the hospital's use of the drug is otherwise
				  exempt under subrule 220.5(1).