Just like any other business, pharmacies in Georgia are subject to collecting sales tax on their sales, unless an exemption is met.
Background on Sales Tax Collection
Let’s do a little policy and history lesson on sales tax collection:
- Sales tax collection is always mandatory on sales made inside of the state.
- Since the passing of the law in South Dakota v. Wayfair, sales tax collection laws have now been expanded to include out-of-state sales.
Prescription Drugs and Tax Exemptions
- Prescription drugs: These are non-taxable in the state of Georgia.
- However, do not confuse this with the additional devices and/or drugs that are a part of the sale.
- For instance, although insulin is not subject to sales tax, the monitor is a separate device that will be subject to sales tax.
Audit Considerations for Pharmacies
When a pharmacy is audited for sales tax, the auditors are looking for:
- Sales that do not meet the exemption requirements
- Items that were wrongly excluded from taxable sales
Many pharmacies are left with a large notice of tax liability when it comes to light that they have not been collecting the appropriate amount of sales tax on the aggregate purchases made by their customers.
Frequently Asked Questions
Are prescription drugs taxable in Georgia?
No, prescription drugs are exempt from sales tax in Georgia. However, any associated medical devices, such as monitors or delivery systems sold alongside the drug, may still be taxable.
Do Georgia pharmacies have to collect sales tax on all items?
Pharmacies in Georgia must collect sales tax on all non-exempt sales. While prescription drugs are exempt, over-the-counter products, devices, and other non-qualifying items are typically taxable.
What triggers a sales tax audit for pharmacies?
Pharmacies may be audited if there are inconsistencies or gaps in their sales tax collection. Auditors focus on transactions that do not meet exemption criteria or on items mistakenly excluded from taxable sales.
How did South Dakota v. Wayfair affect pharmacy sales tax?
The South Dakota v. Wayfair ruling expanded sales tax obligations to include out-of-state sales. This means that pharmacies must collect sales tax even if the customer is located outside Georgia, provided economic nexus thresholds are met.
What are common sales tax mistakes pharmacies make?
Common mistakes include failing to collect tax on taxable medical devices, misclassifying taxable items as exempt, and not tracking aggregate sales that may trigger tax collection duties across state lines.