Emails, Lauren Willis, director of communications, Office of the Texas State Comptroller, March 2-March 8, 2017

From: Selby, Gardner (CMG-Austin)

Sent: Thursday, March 02, 2017 11:57 AM

Subject: Inquiry for a fact check

We are checking a claim by state Rep. Donna Howard this week that condoms were once subject to sales tax in Texas. I’ve noticed conflicting news reports on this point. One story quotes Kevin, here.

Could you guide us to the history of condom taxation in Texas? If the status has changed, why? I seek your on-the-record help and commentary.

I would be happy to hear more soon by phone or email.

g.

1:59 p.m.

March 2, 2017

The following letter should help explain when/why condoms became taxable:

http://aixtcp.cpa.state.tx.us/opendocs/open31/200807138l.html

HB 3319 in the 80th Legislature is what created the change for Tax Code 151.313 (referenced in above letter).

2:02 p.m.

http://lubbockonline.com/stories/032200/sta_032200050.shtml#.WLhq_kXytcA

Lauren Willis

Director of Communications

Texas Comptroller of Public Accounts

2:44 p.m.

March 6, 2017

In FY 2016, we estimate we collected approximately $7M from sales tax on condoms.

From: Selby, Gardner (CMG-Austin)

Sent: Monday, March 06, 2017 5:07 PM

Subject: Following up

I am still befuddled a bit.

In 2000, the comptroller told reporters condoms weren’t taxable as of 4/2000 because they had national drug codes issued by FDA. That drug-code part might be (checking with FDA about condoms and NDCs). But the same section of SB 441, the 1999 tax-cut law, says the items have to be drugs or medicines and I am told the FDA has long regulated condoms as devices—which, it looks to me, have consistently not been exempted from sales tax per Sec. 151.313 of the state tax code.

9:38 a.m.

March 7, 2017

Per SB 441, if it had a drug code it was exempt even if it was considered a device.  In 2007, they took out the “is labeled” language and left in only the “required to be labeled language” and the FDA does not require condoms to be labeled so they were no longer exempt.  Make sense?

2:16 p.m.

March 8, 2017

December 14, 2000

Mr. Patrick Hubbell

Victoria, Texas

Dear Mr. Hubbell:

I appreciated receiving your e-mail regarding the inclusion of prophylactic

devices as tax-free "over-the-counter" drugs.  Prophylactics qualify as

tax-free as a result of the statutory language found in Texas Tax Code Section

151.313(a)(3).

All tangible personal property sold in Texas is taxable unless a specific

statutory exemption applies.  In 1999, the Texas Legislature specified an

exemption for "over-the-counter" drugs if they are labeled with a national drug

code issued by the federal Food and Drug Administration (FDA).  This reference

to the national drug code seems to suggest that the Legislature assumed that

all drugs and medicines would have a national drug code.  Unfortunately, as my

office soon discovered when administering the law, that is not the case.  Some

items that were clearly drugs or medicines did not have a code.

In formulating the list of exempt items, we used the FDA list of drugs and

medicines as a reference, but also focused on the definition of drug and

medicines.   Some of the products on our list, including condoms, have national

drug code numbers issued by the FDA while others do not.  The definition that

is used by my office is as follows:

"To qualify for this exemption, a product must be a drug or medicine, which is

an article or substance applied to, ingested, or inhaled by humans marketed for

the use in the diagnosis, cure, mitigation, treatment or prevention of disease,

illness, injury, or pain."  (from our publication, Sales Tax Exemption for

Over-the-Counter Drugs and Medicines).  See

http://www.window.state.tx.us/taxinfo/taxpubs/tx94_155html.

The definition of drugs and medicines and the statutory language used by the

Texas Legislature lead to the conclusion that the medicated prophylactic

devices, which aid in the prevention of disease, qualify for the exemption.

However, prophylactic devices that are not medicated are not exempt.

You asked whether the FDA pressured the State to include these items.  The

Texas Legislature referenced the FDA's national drug code and the Comptroller's

office followed the language passed by the Legislature.

Please let me know if I can be of further assistance.  Thanks for all that you

do for Texas.

Sincerely,

Carole Keeton Rylander

Texas Comptroller