On January 12, 2015, the Department assessed the Taxpayer for gross receipts tax, penalty and interest for the tax periods from January 31, 2008 through December 31, 2013. On April 9, 2015, the Taxpayer filed a protest to the assessments. The Taxpayer is a doctor of oriental medicine with an expanded scope license that allows here to prescriber certain hormones. During the tax periods in question, the Taxpayer was regularly prescribing a dietary supplement as part of a treatment plan for obesity. The manufacturers of this protein powder only distributed through licensed medical professionals, and patients taking it needed constant medical supervision due to the possibility of ketoacidosis. None of the powder’s ingredients are a controlled substance or legally require a prescription. The Taxpayer was deducting receipts from the sale of the protein powder from her gross receipts because she believed the powder was a prescription drug. The Department audited the Taxpayer and disallowed the deductions because the powder does not include a controlled substance and is not a prescription drug. Section 7-9-73.2 NMSA 1978 provides that receipts from the sale of prescription drugs may be deducted from gross receipts however, the sale of this protein powder, which is more like a dietary supplement or food item, does not fit the requirements necessary to be considered a prescription drug for purposes of the deduction. The Hearing Officer ordered that the assessed penalty be abated as the Taxpayer provided evidence that demonstrated a reasonable mistake of law. The Taxpayer’s protest was granted in part and denied in part.
Jay, Jan C., D.O.M., PC