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Don't Expand the Sales and Use Tax to Clinical Trials and Drug Samples
August 21, 2008
Commissioner, Georgia Department of Revenue
On behalf of the 8,300 Georgia members of the National Taxpayers Union (NTU), I urge you to reject proposed changes (notice number ST-2008-2 regarding rule 560-12-1-.14 and rule 560-12-2-.96) to extend the state sales and use tax to pharmaceutical drugs given out as samples or used in clinical trials. As you are aware, federal law prevents the sale of prescription drug samples and requires appropriate labeling of these items. Additionally, drugs used in clinical trials have no market value because they have yet to receive FDA approval. Applying the sales tax to a product that is "not for sale" or without value would be little more than a thinly veiled revenue grab.
Should Georgia impose these new taxes, there would be significant and costly unintended consequences. Companies are sensitive to each state's tax climate, and business operating decisions are not immune to bad policy. For example, Overstock.com decided to drop New York-based advertisers after New York state officials decided to go after the sales and use tax revenue associated with out-of-state online purchases. Non-profits and small businesses that relied on this stream of advertising income are now being forced to do without. Similarly, some pharmaceutical companies located in Georgia could decide to stop in-state trials of new drugs or stop providing doctors with samples. Our members don't want their friends and families to lose access to potentially life-saving drugs just because the state pursued harmful tax policies.
The Georgia Department of Revenue shouldn't slap new taxes on drugs distributed via doctor-office samples or clinical trials. In fact, approving these new rules, which include undesirable changes to many business sectors, would send one of the worst signals possible to high-tech firms looking to relocate to Georgia.
Finally, NTU is a strong advocate for reducing the paperwork burdens imposed on individuals and small businesses, and a number of industries would face compliance headaches from the proposed rule. Many patients, in particular, already face a mountain of forms thanks to a convoluted medical payment regime. We believe that allowing the Tax Man to further interfere with this process would detract from efforts to keep the time doctors and patients spend together focused on health care. Our members know that the last thing a sick patient needs to worry about is a new tax bill.