State of Rhode Island - Division of Taxation
Sales and Use Tax
Regulation SU 87-61 (Repealed Effective July 14, 1992)
Medicines and Drugs - Method of Computing Exempt Sales of
Accurate and complete records of all purchases and sales of tangible personal property must be kept to verify all exemptions claimed. Druggists must file a monthly return showing their total gross receipts or sales, taking a deduction for the amount of exempt gross receipts from sales of medicines and drugs, etc.
The following method may be used by the druggist in filing the monthly tax return on sales.
The use of this method of computing exempt sales is authorized only for the purpose of making returns. Additional taxes may be imposed or refunds granted if the Division of Taxation upon audit of retailer's accounts and records determines that the return did not accurately disclose the amount of tax due.
In making tax returns, druggists may compute the amount of exempt sales by obtaining the percentage of their purchases of medicines and drugs in relation to total purchases, and applying this percentage to their total gross receipts or sales as follows:
(1) Add all bills for merchandise purchased during the month to obtain the total purchases.
(2) Add all bills for exempt medicines and drugs to obtain the amount of such items purchased.
(3) Divide the total amount of medicine and drug purchases (item 2) by the amount of total purchases (item 1).
This will give you the percentage of purchases of medicine and drugs.
(4) Multiply the total sales by the percentage of medicine and drug purchases (item 3) to obtain the amount of sales which are exempt from the sales tax.
The total purchases as determined in item 1 are $3,500. The purchases of medicine and drugs are $1,575 (item 2). The percentage of purchases of medicine and drugs to total purchases would be 45% (item 3).
If the total sales of the druggist were $5,350 then 45% of this or $2,407.50 would be considered exempt sales of medicines and drugs.
Note: The above figures serve only as an illustration.
R. GARY CLARK
EFFECTIVE DATE: JANUARY 1, 1993
THIS REGULATION IS REPEALED EFFECTIVE JULY 14, 1992 TO COINCIDE WITH THE DATE OF THE REPEAL OF THE EXEMPTION ON PROPRIETARY MEDICINES.