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).
This rule is intended to implement Iowa Code section
423.3(60).
