Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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425.0000 PRESCRIPTION MEDICINES—Regulation 1591

Annotation 425.0165


425.0165 Samples of Medicines. A taxpayer is in the business of manufacturing and wholesaling prescription drugs and medicines which may not be lawfully dispensed to a patient-consumer without a prescription and are intended only for human use. The company's representatives distribute free samples of the prescription drugs to licensed physicians who dispense these drugs to their patients. Federal law prohibits the company from selling the samples.

The gift of medicine for promotional purpose creates a taxable use of the medicine by the manufacturer in California even in circumstances where the sale of the product under specific conditions would have been exempt. The company owes use tax measured by the cost of the materials which are used to manufacture the sample medicines. 2/5/91.

(Note: Subsequent statutory change.)