Taxes, Business

Plain English Breakdown

Checked against official source text during the last sync.

Exemption from Business Tax for Certain Prescription Drugs and Medicines

This bill changes Tennessee's business tax laws to exempt certain prescription drugs and medicines with a monthly cost above $590 from being taxed.

What This Bill Does

• Changes the classification of some prescription drugs and patent medicines so they are not included in the current tax category.
• Exempts prescription drugs or medicines with a monthly cost above $590 from business taxes.
• Also exempts services needed for proper handling, storage, administration, patient education, or monitoring of these exempted drugs and medicines.

Who It Names or Affects

• Businesses that sell prescription drugs and patent medicines in Tennessee.
• Wholesalers and retailers selling the specified prescription drugs and medicines.

Terms To Know

Medicare Part D Specialty Tier Cost Threshold

The cost limit set by Medicare for certain expensive medications, above which these medications are exempt from business taxes in Tennessee.

Thirty-Day Equivalent Supply

The amount of a prescription drug needed to last one month.

Limits and Unknowns

• It is unclear how many businesses will be affected by this change.
• The bill does not specify what happens after the initial exemption period ends in 2025.

Official Summary Text

Present law requires b
usinesses, vocations and occupations that are taxable
to be

designate
d into certain
classifications
for business tax rates. E
ach person
must
be classified according to the dominant business activity
. Classification two includes p
rescription drugs and patent medicines
. This bill exempts certain p
rescription drugs and pate
nt medicines
, as described below,

from being included in classification two.

Classification tw
o taxpayers pay
3/20 of 1% of all sales by a retailer an
d
3/80 of 1% of all sales by a wholesaler
.

EXEMPTIONS

Present law provides certain exemptions from bus
iness taxes. This bill exempts

certain
prescription drug
s
or medicine
s with a
cost for a
30
-day equivalent supply that exceeds
the medicare part D specialty tier cost threshold for 2025 plan years, as determined by the federal centers for medicare and med
icaid services
.
For the 2025 plan year, the medicare part D specialty tier cost threshold is set at $590.
This bill exempts from business taxes
prescription drugs and patent medicines
that cost more than this threshold for a 30-day supply. This bill als
o exempts s
ervices necessary for proper preparation, storage, handling, administration, patient education, or post-sale monitoring of
such exempt
drugs
and
medicines
.

Current Bill Text

SENATE BILL 907
By Haile

HOUSE BILL 767
By Hicks G

HB0767
002784
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 67,
Chapter 4, Part 7, relative to taxation.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 67-4-708(2)(D), is amended by
deleting the subdivision and substituting instead the following:
(D) Prescription drugs and patent medicines not otherwise exempt under § 67-4-
712(g)(1);
SECTION 2. Tennessee Code Annotated, Section 67-4-712, is amended by adding the
following as a new subsection:
(g) The tax imposed by this part does not apply to any receipts from the sale of
the following:
(1) Any prescription drug or medicine with a cost for a thirty-day
equivalent supply that exceeds the medicare part D specialty tier cost threshold
for 2025 plan years, as determined by the federal centers for medicare and
medicaid services (CMS) pursuant to 42 CFR 423.104(d)(2)(iv)(A); or
(2) Services necessary for proper preparation, storage, handling,
administration, patient education, or post-sale monitoring of drugs or medicines
exempt under subdivision (g)(1).
SECTION 3. This act takes effect July 1, 2025, the public welfare requiring it.