86 Ill. Adm. Code 1300.130.311
Drugs, Medicines, Medical Appliances, and Grooming and Hygiene Products
TITLE 86: REVENUE
CHAPTER I: DEPARTMENT OF REVENUE
PART 130 RETAILERS' OCCUPATION TAX
SECTION 130.311 DRUGS, MEDICINES, MEDICAL APPLIANCES, AND GROOMING AND HYGIENE PRODUCTS
Section 130.311 Drugs, Medicines, Medical Appliances,
and Grooming and Hygiene Products
a) General
.
With respect to
prescription and nonprescription medicines, drugs,
medical appliances, products classified as Class III medical devices by the
United States Food and Drug Administration that are used for cancer treatment
pursuant to a prescription, as well as any accessories and components related
to those devices, modifications to a motor vehicle for the purpose of rendering
it usable by a person with a disability, and insulin, blood sugar testing
materials, syringes, and needles used by human diabetics, the tax is imposed at
the rate of 1%. Beginning January 1, 2014, "prescription and nonprescription
medicines and drugs" includes medical cannabis
and medical cannabis
infused products
purchased from a registered dispensing organization under
the Compassionate Use of Medical Cannabis Program Act
[410 ILCS 130]
.
[35
ILCS 120/2-10] Medical cannabis, including medical cannabis infused products,
sold by registered dispensing organization under the Compassionate Use of
Medical Cannabis Program Act, is subject to Retailers' Occupation Tax at the 1%
rate, plus applicable local taxes. Cannabis paraphernalia is subject to
Retailers' Occupation Tax at the general merchandise rate of 6.25%. Grooming
and hygiene products do not qualify for the 1% rate, regardless of whether the
products make medicinal claims. Grooming and hygiene products are taxed at the
general merchandise rate of 6.25%. [See 35 ILCS 120/2-10]
AGENCY NOTE: Medical cannabis is
subject to tax under both the Metro East Mass Transit District Retailers'
Occupation Tax (as provided in 70 ILCS 3610/5.01) and the Regional
Transportation Authority Retailers' Occupation Tax (taxed at the rate
established for prescription and nonprescription medicines in Cook County and
at the rate established for general merchandise in all other areas of the
metropolitan region that are subject to the tax, as provided in 70 ILCS
3615/4.03).
b)
Beginning
January 1, 2017
and through December 31, 2026, menstrual pads, tampons,
and menstrual cups
are exempt from the Retailers' Occupation Tax. [35 ILCS
120/2-5(42)] Menstrual pads (including pantiliners) are exempt even when the
label indicates that those products are to be used as both menstrual products
and incontinence products. However, incontinence products that do not indicate
on the label that they can also be used as menstrual products are not exempt.
c) Medicines
and Drugs. Except for grooming and hygiene products described in subsection (d),
a medicine or drug is any pill, powder, potion, salve, or other preparation for
human use that purports on the label to have medicinal qualities. Medicines
prescribed by veterinarians for animals are subject to the high rate of tax. A
written claim on the label that a product is intended to cure or treat disease,
illness, injury, or pain or to mitigate the symptoms of such disease, illness,
injury, or pain constitutes a medicinal claim.
1) Examples
of medicinal claims that will qualify the product for the low rate of tax
include, but are not limited to:
A) "medicated";
B) "heals
(a medical condition)";
C) "cures
(a medical condition)";
D) "for
relief (of a medical condition)";
E) "fights
infection";
F) "stops
pain";
G) "relief
from poison ivy or poison oak";
H) "relieves
itching, cracking, burning";
I) "a
soaking aid for sprains and bruises";
J) "relieves
muscular aches and pains";
K) "cures
athlete's foot";
L) "relieves
skin irritation, chafing, heat rash, and diaper rash";
M) "relief
from the pain of sunburn"; and
N) "soothes
pain".
2) The
use of the terms "antiseptic", "antibacterial", or "kills
germs" may or may not constitute a medicinal claim.
A) The
use of these terms in conjunction with a claim that the product kills germs in
general does not constitute a medicinal claim.
B) However,
a claim that a product is for use as an antiseptic to kill germs to prevent
infection in cuts, scrapes, abrasions, and burns does constitute a medicinal
claim.
3) Examples
of claims that do not constitute medicinal claims include, but are not limited
to:
A) "cools";
B) "absorbs
wetness that can breed fungus";
C) "deodorant"
or "destroys odors";
D) "moisturizes";
E) "freshens
breath";
F) "antiperspirant";
G) "sunscreen";
H) "prevents";
and
I) "protects".
d) Grooming
and Hygiene Products.
Beginning September 1, 2009, "nonprescription
medicines and drugs" does not include grooming and hygiene products.
"Grooming and hygiene products" includes, but is not limited to,
soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants,
and sun tan lotions and
sun
screens, unless those products are available
by prescription only, regardless of whether the products meet the definition of
"over-the-counter drugs". "Over-the-counter drug" means a
drug for human use that contains a label that identifies the product as a drug
as required by 21 CFR 201.66. The "over-the-counter drug" label
includes a "Drug Facts" panel or a statement of the "active
ingredient(s)" with a list of those ingredients contained in the compound,
substance or preparation.
[35 ILCS 120/2-10]
1) As a
result, on or after September 1, 2009:
A) nonprescription
medicines and drugs that are grooming and hygiene products do not qualify for
the 1% rate of tax for medicines and drugs under subsection (c). Grooming and
hygiene products do not qualify for the 1% rate, regardless of whether the
products make medicinal claims or meet the definition of over-the-counter drugs.
Grooming and hygiene products are taxed at the general merchandise rate of
6.25%.
B) products
available only with a prescription are not "grooming and hygiene products".
2) Examples
of products that are grooming and hygiene products include, but are not limited
to:
A) all
shampoos, hair conditioners, and hair care products;
B) shaving
creams or lotions;
C) deodorants;
D) moisturizers;
E) breath
spray;
F) all condoms,
with and without spermicide;
G) baby diapers
and adult diapers;
H) baby
powder;
I) contact
lens solutions;
J) hand
sanitizers;
K) acne
products;
L) skin
creams, lotions, ointments, and conditioners;
M) foot
powders;
N) foot
wear insoles that are intended to eliminate odor;
O) feminine
hygiene products such as feminine wipes, washes, powders and douches, but,
beginning January 1, 2017 through December 31, 2026, the following feminine
hygiene products are exempt from tax: tampons, menstrual pads, and menstrual
cups (see Section 130.120(vv)); and
P) lip
balms.
3) The
following products are not grooming and hygiene products and may qualify for
the 1% rate if they meet the requirements of subsection (c):
A) hydrocortisone
creams or ointments;
B) anti-itch
creams or ointments;
C) vaginal
creams or ointments;
D) nasal
sprays;
E) eye
drops;
F) topical
pain relievers;
G) ice/heat
creams;
H) rubbing
alcohol;
I) denture
creams or adhesives; and
J) styptic
pencils.
4) Nonprescription
medicines and drugs and products that are not grooming and hygiene products do
not qualify for the 1% rate of tax unless they meet the requirements of
subsection (c).
5) Products
that are taken orally and ingested, such as vitamins, supplements and weight
gain or weight loss products, are not grooming and hygiene products.
e) Medical
Appliances: A medical appliance is an item that is used to directly substitute
for a malfunctioning part of the human body.
1) For
purposes of this Section, an item that becomes part of the human body by
substituting for any part of the body that is lost or diminished because of
congenital defects, trauma, infection, tumors, or disease is considered a
medical appliance. Examples of medical appliances that will qualify the
product for the low rate of tax include, but are not limited to:
A) breast
implants that restore breasts after removal due to cancer or for preventative,
medical reasons;
B) heart
pacemakers;
C) artificial
limbs;
D) dental
prosthetics;
E) crutches
and orthopedic braces;
F) dialysis
machines (including the dialyzer);
G) wheelchairs;
H) mastectomy
forms and bras;
I) mobility
scooters; and
J) sleep
apnea devices.
2) Corrective
medical appliances such as hearing aids, eyeglasses, contact lenses, and
orthodontic braces qualify as medical appliances subject to the low rate of
tax.
3) Sterile
band-aids, dressings, bandages, and gauze qualify for the low rate because they
serve as a substitute for skin.
4) Items
transferred incident to cosmetic procedures are not considered medical
appliances. For purposes of this Section, a cosmetic procedure means any
procedure performed on an individual that is directed at improving the
individual's appearance and that does not prevent or treat illness or disease,
promote the proper function of the body or substitute for any part of the body
that is lost or diminished because of congenital defects, trauma, infection,
tumors, or disease. Cosmetic procedures include, but are not limited to,
elective breast, pectoral, or buttock augmentation.
5) Diagnostic
equipment shall not be deemed to be a medical appliance, except as provided in
Section 130.311(g). Other medical tools, devices, and equipment such as x-ray
machines, laboratory equipment, and surgical instruments that may be used in
the treatment of patients but that do not directly substitute for a
malfunctioning part of the human body do not qualify as medical appliances.
Sometimes a kit of items is sold where the purchaser will use the kit items to
perform self-treatment. The kit will contain paraphernalia and sometimes
medicines. An example is a kit sold for the removal of ear wax. Because the
paraphernalia hardware is for treatment, it generally does not qualify as a
medical appliance. However, the Department will consider the selling price of
the entire kit to be taxable at the reduced rate when the value of the
medicines in the kit is more than half of the total selling price of the kit.
6) Supplies,
such as cotton swabs, disposable diapers, toilet paper, tissues and towelettes
and cosmetics, such as lipsticks, perfume, and hair tonics, do not qualify for the
reduced rate.
7) Medical
appliances may be prescribed by licensed health care professionals for use by a
patient, purchased by health care professionals for the use of patients or
purchased directly by individuals.
On and after
January 1, 2025, leases
of medical appliances by lessors to others for
human use also qualify for the reduced rate of tax.
f) Certain Medical Devices.
Effective August 19, 2016,
products classified as Class III medical devices by the United States Food and
Drug Administration that are used for cancer treatment pursuant to a
prescription, as well as any accessories and components related to those
devices, qualify for the 1% rate of tax.
[35 ILCS 120/2-10]
g)
Insulin,
blood sugar
testing materials, syringes, and needles used by human
diabetics, the tax is imposed at the rate of 1%.
[35 ILCS 120/2-10]
h) Modifications
Made to a Motor Vehicle for the Purpose of Rendering It Usable by a Person with
a Disability
1) Effective
August 17, 1995,
modifications made to a motor vehicle, as defined in
Section 1-146 of the Illinois Vehicle Code
[625 ILCS 5/1-146],
for the
purpose of rendering it usable by a person with a disability, qualify for the
reduced rate of tax
.
[35 ILCS 120/2-10] The low rate applies to
modifications that enable a person with a disability to drive a vehicle or that
assist in the transportation of persons with disabilities. Examples of such
modifications include, but are not limited to, special steering, braking,
shifting or acceleration equipment, or equipment that modifies the vehicle for
accessibility, such as a chair lift.
2) For
purposes of this subsection (h), the term "person with disabilities" has
the meaning set forth in Section 1-159.1 of the Illinois Vehicle Code [625 ILCS
5/1-159.1].
i) Reporting
1) The
retailer must keep an actual record of all sales and must report tax at the
applicable rates, based on sales as reflected in the retailer's records. Books
and records must be maintained in sufficient detail so that all receipts
reported with respect to drugs, medicines, and medical appliances can be
supported.
2) Suppliers
that sell items to health professionals must collect tax based on the actual
use of the items. Health professionals that purchase items that may or may not
qualify for the low rate, depending upon the ultimate use of the items by the
health professionals, may provide their suppliers with certificates that
identify the percentage of items being purchased that qualify for the low rate,
i.e., that are purchased to be used to replace a malfunctioning part of the
body. (For example, cosmetic versus reconstructive procedures.)
A) The
certificate should contain the following information:
i) the
seller's name and address;
ii) the
purchaser's name and address;
iii) a
description of the medical appliances being purchased;
iv) the
percentage of the medical appliances being purchased that qualify for the low
rate;
v) the
purchaser's signature or the signature of an authorized employee or agent of
the purchaser and date of signing; and
vi) if
the purchaser is registered with the Department, the purchaser's Registration
Number or Resale Number.
B) A
supplier that obtains a certificate from a health professional that complies
with subsection (i)(2)(A) will not be liable for additional retailers'
occupation tax in the event the actual percentage of items purchased by the
health professional that qualify for the low rate is less than the percentage
claimed in the certificate if it remitted retailers' occupation tax to the
Department based on the information contained in the certificate received from
the health professional.