Ruling 94-12, Sales and Use Taxes / Pharmacy Consultation Services / Business Management and Management Consulting Services / Personnel Training
This Ruling is amplified by Ruling 94-21 and cited in Ruling 97-1
FACTS:
A person licensed to practice pharmacy under Conn. Gen. Stat. § 20-170 and the regulations thereunder ("the Pharmacist") renders "pharmacy consultation services" to skilled and intermediate care nursing facilities. Such services include providing a monthly review of the appropriateness of the drug requirements for patients in the facility; reviewing patients' drug dosages; assessing patients' drug regimens; monitoring patients' vital signs; observing patients; and providing in-service training of nursing home personnel.
ISSUES:
Whether the Pharmacist's pharmacy consultation services are taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. §12-407(2)(i)(J) and Conn. Agencies Regs. §12-407(2)(i)(J)-1.
DISCUSSION:
Conn. Gen. Stat. §12-407(2)(i)(J) imposes sales and use taxes on "business analysis, management, management consulting and public relations services" ("business management services"). Conn. Agencies Regs. §12-407(2)(i)(J)-1 provides that to be taxable, business management services must relate to the service recipient's "core business" or "human resource management activities."
"The term 'core business activities' means and includes activities directly related to a service recipient's lines of business involving sales of products, property, goods or services to others..." Conn. Agencies Regs. §12-407(2)(i)(J)-1(h) (emphasis added). "The term 'human resource management activities' means and includes activities relating to (1) the hiring, development, job-related training, compensation and management of personnel..." Conn. Agencies Regs. §12-407(2)(i)(J)-1(i) (emphasis added). However, Conn. Gen. Stat. §12-407(2)(i)(J) does not apply where:
the services rendered are professional services that are rendered by a member of a profession, acting in such member's professional capacity, and that are commonly associated with such profession. The term 'profession' means any generally acknowledged professional occupation requiring a degree, license or specialized training, including, but not limited to, the medical, legal, accounting and actuarial professions...
Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3).
Whether the professional services exception contained in Conn. Gen. Regs. § 12-407(2)(i)(J)-1 applies to the Pharmacist's services turns on whether the Pharmacist is a member of a "profession," whether the services rendered by the Pharmacist are rendered in his professional capacity, and whether the services rendered by the Pharmacist are commonly associated with his profession.
The licensure and education requirements of Chapter 382 of the General Statutes (Conn. Gen. Stat. § 20-163 et seq.) and the regulations thereunder establish that the practice of pharmacy is a "generally acknowledged professional occupation requiring a degree, license or specialized training." Thus, with respect to the first issue, the Pharmacist is a member of a "profession" within the meaning of Conn. Agencies Regs. § 12-407(2)(i)(J)-1(c)(3).
The "'practice of pharmacy' means the sum total of knowledge, understanding, judgments, procedures, securities, controls and ethics used by a licensed pharmacist to assure optimal safety and accuracy in the compounding, distributing, dispensing and use of drugs, dangerous drugs and poisons." Conn. Gen. Stat. § 20-184a.
The Pharmacist's services of providing a monthly review of the appropriateness of the drug requirement for patients in the facility, reviewing patients' drug dosage, assessing patients' drug regimens, monitoring patients' vital signs, and observing patients fall within the ambit of the "practice of pharmacy" as that term is defined in Conn. Gen. Stat. § 20-184a. Therefore such services are rendered in the Pharmacist's professional capacity.
Less obvious is whether the Pharmacist's service of providing in-service training of nursing facility personnel is a service that is both "rendered in the pharmacist's professional capacity" and "commonly associated with his profession."
The Pharmacist conducts in-service training programs that are tailored to meet the specific needs of the facility. Such programs address drug therapies, the effects of drugs on patients, and all aspects of a pharmaceutical program in a long-term care facility, including compliance with federal and state laws.
Federal regulations require skilled and intermediate care nursing facilities to provide pharmaceutical services to meet the needs of each resident and to employ or obtain the services of a licensed pharmacist. 42 C.F.R. § 483.60. See also Conn. Agencies Regs. §19-13-D8v.
Furthermore, Paragraph 4.00 of the Guidelines for Pharmaceutical Consulting in Connecticut's Long-Term Health Care Facilities (the "Pharmaceutical Guidelines"), prepared by the Pharmacy Advisory Committee of the Connecticut Department of Health Services, notes that
[as part of the standard for [nursing] staff development, federal regulations require the planning and implementation of an on-going educational program for the development and improvement of skills of all of the [nursing] facility's personnel, including but not restricted to training related to problems and needs of the aged, ill, and disabled. The [pharmacist] consultant has an opportunity to bring his/her expertise to the staff of the facility and affecting appropriate pharmacological utilization by routinely presenting in-service education programs at the facility [emphasis added].
Therefore, it can be inferred from the federal regulations and State Pharmaceutical Guidelines that in-service training programs are related to the "practice of pharmacy" and are rendered in the Pharmacist's professional capacity.
RULING:
The Pharmacist is a member of a "profession" within the meaning of Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3). The Pharmacist renders pharmacy consultation services in his professional capacity. Such pharmacy consultation services are commonly associated with the practice of pharmacy. Therefore, the professional services exception in Conn. Agencies Regs. §12-407(2)(i)(J)-1(c)(3) applies and the Pharmacist's pharmacy consultation services are not taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. 12-407(2)(i)(J).
This Ruling clarifies Ruling No. 92-14 and Policy Statement 92(2.1).
LEGAL DIVISION
June 24, 1994