Current through Register Vol. 49, No. 9, September, 2024
The Commissioner of Revenue, pursuant to his authority under
Ark. Code Ann. §§
26-52-316;
26-52-404;
26-52-405;
26-53-106;
26-53-131,
does hereby issue the following regulation:
A. DEFINITIONS.
1. "Drug" means a compound, substance, or
preparation, and any component of a compound, substance, or preparation, other
than "food and food ingredients," "dietary supplements," or "alcoholic
beverages" that is the following:
a.
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
b.
Intended for use in the diagnosis, cure, mitigation, treatment, or prevention
of disease; or
c. Intended to
affect the structure or any function of the body.
2. "Prescription" means an order, formula, or
recipe issued in any form of oral, written, electronic, or other means of
transmission by a veterinarian.
3.
"Veterinarian" means a practitioner of veterinary medicine duly licensed under
the laws of this or some other state.
4. "Veterinarian-client-patient relationship"
means the veterinarian has assumed the responsibility for making medical
judgments regarding the health of the animal and the need for medical
treatment, and the client, that is, the owner or caretaker, has agreed to
follow the instruction of the veterinarian, and there is sufficient knowledge
of the animal by the veterinarian to initiate at least a general or preliminary
diagnosis of the medical condition of the animal. This means that the
veterinarian has recently seen and is personally acquainted with the keeping
and care of the animal, by virtue of an examination of the animal or by
medically appropriate and timely visits to the premises where the animal is
kept, and the practicing veterinarian is readily available for follow-up in
case of adverse reactions or failure of the regimen of therapy.
B. SALES BY VETERINARIANS.
1. Tangible Personal Property Used or
Consumed by the Veterinarian. Veterinarians are deemed to be the consumers or
users of tangible personal property that is used or consumed by them in the
nontaxable practice of veterinary medicine. Tangible personal property that is
administered by a veterinarian, or by an assistant under the veterinarian's
direction, during the treatment of an animal is furnished as part of the
nontaxable practice of veterinary medicine and is not taxed as a retail sale of
tangible personal property. The veterinarian must pay tax on its purchase of
tangible personal property used or consumed in the nontaxable practice of
veterinary medicine. See subsection (C).
Example 1: J.T. takes his puppy to the veterinarian for a
rabies vaccination and checkup. J.T. is charged for the rabies vaccination and
checkup, which are separately itemized on the invoice. Administering the
vaccine is considered a nontaxable veterinary service. The vaccine is consumed
in the rendition of veterinary services and the veterinarian is required to pay
sales or use tax on the purchase of the vaccine. The veterinarian should not
collect sales tax from J.T.
Example 2: J.T. takes his dog to the veterinarian to be
microchipped. J.T. is charged for the chip, implant procedure, and enrollment
in a pet recovery service, which are separately itemized on the invoice. The
microchip is consumed in the rendition of veterinary services and the
veterinarian is required to pay sales or use tax on the purchase of the
microchip. The veterinarian should not collect sales tax from J.T.
2. Drugs Requiring a Prescription.
a. A veterinarian's sale of a drug that can
only be legally dispensed by prescription is not taxable when sold by the
veterinarian pursuant to a veterinarian-client-patient relationship. A drug
that can only be legally dispensed by prescription is furnished as part of the
nontaxable practice of veterinary medicine. The veterinarian must pay tax on
its purchase of drugs that can only be legally dispensed by prescription. See
subsection (C).
Example 1: J.T. takes his dog to the veterinarian to examine a
skin condition. The veterinarian determines that the dog has a bacterial
infection and prescribes a drug to be administered twice a day for a week. The
drug can only be legally dispensed by prescription. J.T. is charged for the
office visit and the drug, which are separately itemized on the invoice. The
veterinarian should not collect sales tax from J.T.
Example 2: J.T. takes his cat to the veterinarian. The
veterinarian diagnoses the cat with a heart condition and prescribes a
diuretic. The diuretic can only be legally dispensed by prescription. J.T.
refills the prescription on a monthly basis at the veterinary clinic. The
veterinarian should not collect sales tax from J.T. on the refill because the
drug is sold by the veterinarian pursuant to a veterinarian-client-patient
relationship.
b. However,
the sale of a drug that can only be dispensed by prescription is taxable when a
veterinarian sells a drug prescribed by another veterinarian or the drug is
sold by a pharmacist. The sale of the drug is a retail sale of tangible
personal property because the drug is not sold by a veterinarian pursuant to a
veterinarian-client-patient relationship.
Example: J.T. takes his cat to the veterinarian. The
veterinarian diagnoses the cat with a heart condition and prescribes a beta
blocker. The drug can only be legally dispensed by prescription. J.T. must
refill the prescription on a monthly basis. J.T. refills the prescription for
the beta blocker at his local pharmacy. The pharmacy should collect tax from
J.T. on the retail sale of the beta blocker.
3. Other Tangible Personal Property. The
retail sale of tangible personal property other than a drug that can only be
legally dispensed by prescription is subject to sales tax. If the invoice does
not separately state taxable and nontaxable items, then the total amount
reflected on the invoice may be subject to tax.
Example 1: J.T. takes his dog to the veterinarian to examine a
skin condition. The veterinarian determines that the dog has a bacterial
infection and prescribes a drug to be administered twice a day for a week. The
drug can only be legally dispensed by prescription. During the checkout, J.T.
also purchases three months of flea and tick preventative that can be purchased
without a prescription. J.T. is charged for the office visit, the drug, and the
flea and tick preventative, which are separately itemized on the invoice. The
veterinarian should collect sales tax from J.T. on the retail sale of the flea
and tick preventative.
4.
Grooming and Boarding Services. Pursuant to Ark. Code Ann. §
26-52-316
pet grooming and kennel services are taxable. A veterinarian that provides pet
grooming or kennel services must collect sales tax from its customers. See
Arkansas Gross Receipts Tax Rule GR-9.16.
C. PURCHASES BY VETERINARIANS.
1. Permitted Business.
a. A veterinarian holding a sales tax permit
may purchase tangible personal property exempt from sales or use tax as a sale
for resale. See Arkansas Gross Receipts Tax Rule GR-53. As tangible personal
property used, consumed, or furnished in the nontaxable practice of veterinary
medicine is withdrawn from stock, the veterinarian is required to self-assess
and pay sales or use tax based upon the purchase price of the property. When
tangible personal property is sold at retail, the veterinarian must collect
sales tax from the customer based upon the sales price.
Example: A veterinarian purchases a case of a fast-acting flea
preventative. Some of the flea preventative will be used to treat animals
receiving medical care at the veterinary clinic and some of the flea
preventative will be sold to customers at retail. The veterinarian should
purchase the flea preventative exempt from tax. Any of the flea preventative
that is used or consumed by the veterinarian should be treated as a withdrawal
from stock and the veterinarian is required to self-assess, report, and pay tax
on the purchase price of the flea preventative. The veterinarian is required to
collect sales tax on the sales price of the flea preventative when it is sold
at retail.
b. A
veterinarian may pay sales or use tax on purchases of tangible personal
property used or consumed in the nontaxable practice of veterinary medicine at
the time of purchase.
2.
Non-Permitted Business. If a veterinarian does not have a sales tax permit, the
veterinarian is required to pay sales or use tax at the time of purchase.
Tangible personal property purchased from an out-of-state vendor for use,
storage, distribution, or consumption in the performance of veterinary services
is subject to Arkansas use tax. If the vendor does not collect tax at the time
of sale, the veterinarian is required to report and remit Arkansas use tax on
the purchase price of the tangible personal property. A credit for sales tax
paid in another state is given to offset Arkansas use tax if the other state
requires the tax to be paid. See Arkansas Compensating Use Tax Rules UT-3,
UT-4, UT-7, and UT-11.
3. Sales of
tangible personal property, such as office supplies and equipment, surgical
instruments, or operating supplies, to a veterinarian are taxable sales and the
veterinarian is required to pay sales or use tax on the purchase of these
items.
D. COMMERCIAL
PRODUCTION OF LIVESTOCK AND POULTRY. Arkansas law provides a limited exemption
for agricultural chemicals such as vaccines, medications, and medicinal
preparations used in the commercial production of livestock and poultry. Such
vaccines, medications, and medicinal preparations are not subject to sales or
use tax when sold to the producer of the livestock or poultry. See Ark. Code
Ann. §§
26-52-404,
26-52-405,
and Arkansas Gross Receipts Tax Rule GR-45.
