Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Purdue Frederick Co. v. State Board of Equalization . . . (1990)

Antiseptic Sudsing Skin Scrub Used by Hospital Is an Exempt Medicine

Taxpayer manufactures Betadine Surgical Scrub, an antiseptic, microbicidal, sudsing skin cleanser, which it distributes and sells to hospitals for preoperative use on patients, preoperative scrubbing by doctors, nurses and other operating personnel, and for hand cleansing by hospital personnel caring for and treating patients. The Board determined that Betadine was not an exempt medicine, except when applied to patients.

The court of appeal held in favor of taxpayer, finding that Betadine is an exempt medicine. Betadine is a "medicine," since it is a substance or preparation intended for use by external application to the human body in the mitigation and prevention of disease, and is commonly recognized as a substance or preparation intended for that use. A medicine is exempt from taxation if, among other things, it is sold to a "health facility for the treatment of a human being." The court found that, in all its hospital uses, Betadine is applied to the human body. In addition, the application of Betadine by hospital personnel to their own bodies benefits the patient and constitutes a critical component of the patient's treatment. The court noted that the Legislature had expanded the scope of exempt medicines beyond prescription medicines. Purdue Frederick Co. v. State Board of Equalization (1990) 218 Cal.App.3d 1021.