SALES TAX: PRESCRIBED OTC DRUGS                                                            H.B. 5678:

                                                                                                      FLOOR SUMMARY

House Bill 5678 (as reported without amendment)

Sponsor:  Representative Kenneth Horn

House Committee:  Tax Policy

Senate Committee:  Finance

CONTENT

The bill would amend the General Sales Tax Act to provide a tax exemption for the sale of over-the-counter drugs pursuant to a prescription.

Currently, the sales tax does not apply to sales of drugs for human use that can only be legally dispensed by prescription.  The bill, instead, would exempt the sale of a prescription drug for human use, and an over-the-counter drug for human use pursuant to a prescription.

The bill would define "prescription" and "prescription drug" as those terms are defined in Part 177 of the Public Health Code. 

(The Code defines "prescription" as an order by a prescriber (e.g., a licensed dentist, physician, or podiatrist) to fill, compound, or dispense a drug or device written and signed; written or created in an electronic format, signed, and transmitted by facsimile; or transmitted electronically or by other means of communication.

"Prescription drug" means one or more of the following:

-- A drug dispensed pursuant to a prescription.

-- A drug bearing the Federal legend "CAUTION: federal law prohibits dispensing without prescription" or "Rx only".

-- A drug designated by the Michigan Board of Pharmacy as a drug that may only be dispensed pursuant to a prescription.)

MCL 205.54g                                                             Legislative Analyst:  Suzanne Lowe

FISCAL IMPACT

The bill would reduce State revenue to both the General Fund and the School Aid Fund, a well as revenue to local units.  The Department of Treasury estimates that the bill would reduce revenue by approximately $10.0 million per year, with $7.3 million of the reduction affecting the School Aid Fund, $1.7 million of the reduction affecting General Fund revenue, and the remaining $1.0 million affecting local units through constitutional revenue sharing.

Date Completed:  11-8-12                                                         Fiscal Analyst:  David Zin

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.