NEWPORT NEWS -- Geoff Tennille and his wife Martha are pretty savvy shoppers.They watch prices very closely and they know what items should be charged state sales tax.
So, when they purchased medicated mouthwash at a Target in Hampton and were charged 5% tax, they knew something wasn’t right, even if the store didn’t.
“The state clearly needs to make it clear to the stores to know what is taxed and not taxed,” said Martha Tennille.
13News Investigators bought a number of over-the-counter items at Target; sunscreens with SPF, products for diaper rash and medicated mouthwashes.
We were charged sales tax even though a state law that’s been on the books for 15 years clearly says, “Nonprescription drugs and proprietary medicines" are exempt from taxes if they are used in the, ”Cure, mitigation, treatment or prevention of disease of human beings.”“They err on the side of 'Let’s tax it until someone complains,'” Martha Tennille added.
13News Investigators found that Target isn’t the only store incorrectly charging sales tax on over-the-counter products.
We bought a wide range of items at a number of major retailers, grocery stores and pharmacy chains across Hampton Roads. The state says all of these products are supposed to be tax-free.
Although 13News first brought this issue to light five years ago, we still found store after store incorrectly charging customers sales tax.
The issue was news to State Sen. Jeff McWaters, who said this needs to be looked into.
“Look, people pay enough in taxes. We hear that all the time, and they want us to be very efficient with how their money is spent,” McWaters said.
State Sen. Ralph Northam told us he supports a yearly review of tax credits.
“Just to put a tax credit in and forget it and let it go probably isn’t in the best interest of the Commonwealth,” Northam said.
A family that regularly buys antiseptic mouthwash, a fluoride rinse for the kids, sunscreen and diaper rash ointment might pay $1.40 in sales tax they didn’t owe. That money adds up. In fact, if every household in Virginia overpaid just one dollar a week in sales tax, on items such as medicated mouthwash, sunscreen and shaving cream, the state would collect more than $150 dollars a year. That's money that you could be using to buy gas or pay your power bill. Over 15 years, that kind of money adds up to more than $2 billion.
13News Investigators want to know what it's going to take to get stores to stop wrongly charging sales tax. What’s the Department of Taxation doing to make sure people get the tax break they were promised and how has this issue escaped lawmakers for so long?
When pressed by 13News Investigators, Target did admit to finding errors, saying, “We plan to use this experience to learn and better our review processes moving forward.”
Five years ago when we confronted Target about the very same issue we were told, “We have made our teams aware so we can take appropriate action.”
In 2008, the Department of Taxation told 13News it only has a handful of auditors to keep track of 200,000 stores.
“We leave it to the retailers, in large part, to police themselves,” said Joel Davison, spokesman for the Department of Taxation.
When 13News asked then-Governor Tim Kaine how this could be going on, he told us he was outraged. “If we have a chance to catch folks, they will know we take this very, very seriously,” Kaine told us.
Since our first reports aired, more stores are getting it right. Our spot-check found Walgreen's getting it right the most.
There’s still a lot of confusion as to which over-the-counter items are to be taxed and which aren’t. Newer products hit store shelves every day, which only adds to the confusion.
Clearly what was intended to be tax relief for people of the Commonwealth 15 years ago is still a tax burden, and there’s no reason to believe this will be fixed anytime soon.
May 15, 1998 98-4
Retail Sales and Use Tax: Exemption for Nonprescription Drugs
and Proprietary Medicines
Effective July 1, 1998, nonprescription drugs and proprietary medicines will be exempt from the retail
sales and use tax. Nonprescription drugs include any substances or mixture of substances containing
medicines or drugs for which no prescription is required and which are generally sold for internal or topical use
in the cure, mitigation, treatment, or prevention of disease in human beings. This exemption is also applicable
to proprietary medicines which is any nonprescription drug sold to the general public under the brand name or
trade name of the manufacturer and which does not contain any controlled substance or marijuana.
The exemption for nonprescription drugs and proprietary medicines does not apply to:
(1) cosmetics - articles applied to the body for cleansing, beautifying, promoting attractiveness or altering
the appearance (includes makeup, body lotions, cold creams, and hair restoration products);
(2) toilet articles - articles advertised or held out for sale for grooming purposes (includes soaps, toothpastes,
hair sprays, shaving products, colognes, deodorants, and mouthwashes);
(3) food products and supplements - including those classified as such by the Federal Food and Drug
Administration (includes herbal teas, drinks, pills, or supplements, diet aids, and weight control
preparations);
(4) vitamins and mineral concentrates sold as dietary supplements or adjuncts (except when sold pursuant to
a written prescription by a licensed physician, nurse practitioner, or physicians assistant); and
(5) devices - includes contraceptive items, birth control preparations, and testing kits. Diabetic testing kits will continue to be exempt under a separate exemption for specific medical equipment.
This exemption is applicable regardless of the nature of the purchaser. Thus, nonprescription drugs and proprietary medicines may be purchased tax exempt by individuals, physicians, medical facilities, and all other entities. Retail dealers making sales of nonprescription drugs and proprietary medicines must keep records segregating purchases and sales of exempt items.
In addition, effective July 1, 1998, samples of nonprescription drugs and proprietary medicines
distributed free of charge by the manufacturer are exempt from the sales and use tax. Currently, pharmaceutical manufacturers are subject to the use tax, based on the cost price, of samples distributed in Virginia by their salespersons.
Examples of taxable and exempt nonprescription drugs and proprietary medicines are listed below.
This list is intended as a guide and is not intended to be all inclusive.
Exempt items
Acne products
Alcohol, rubbing
Alcohol swabs
Allergy relief products
Analgesics
Anesthetics
Antacids
Antibiotic ointments
Antifungals
Antihistamines
Antimalarials
Antinauseants
Antiseptics
Aspirin
Asthma preparations
Baby powder (medicated)
Bee sting relievers
Benzoin
Boric acid ointment
Burn remedies
Calamine lotion
Camphor
Castor oil
Cathartics
Cod liver oil
Cold capsules and remedies
Cold/canker sore preparations
Contact lens lubricating and wetting
solutions
Cough and cold items, cough drops, cough syrups
Dandruff and seborrhea preparations
Decongestants
Diarrhea aids and remedies
Digestive aids
Disinfectant (for use in humans)
Diuretics
Earache/earwax removal preparations
Eczema preparations
Epsom salts
Expectorants
Eye drops, lotions, ointments and washes for
healing, treatment or therapeutic use
Fever blister aids
First aid healing agents, cleaners
Fluoride rinses and antiseptic dental washes
Foot care products for treatment of
infections (callous removers, medicated corn
plasters, ingrown toenail preparations, athlete s
foot treatments)
Fungicides (for use on humans)
Glucose tablets
Glycerine products intended for medical use
Hay fever aid products
Headache relief aid products
Hemorrhoidal treatments
Hydrogen peroxide
Ibuprofen
Insect bite and sting preparations
Iodine, tincture of
Itch, rash relievers
Laxatives
Lice products used to kill lice that infect
humans
Liniments
Lip balms, ices and salves (medicated)
Lotions (medicated)
Menstrual cramp relievers
Mercurochrome
Milk of Magnesia
Mineral oil
Motion sickness remedies
Mouthwashes (antiseptic)
Muscle ache relievers
Nasal drops and sprays
Nicotine supplements (that treat nicotine
withdrawal symptoms)
Oil of wintergreen
Pain relievers (oral or topical)
Parasiticides (for humans)
Peroxide (medicinal)
Poison ivy and oak preparations
Powder (medicated)
Rectal preparations
Shampoos (medicated)
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