Taxes, Business

Plain English Breakdown

The official source material does not provide specific details on revenue loss or comparisons with other state or federal laws, leaving those points as unknowns.

Exemption from Business Tax for Certain Prescription Drugs

This bill changes Tennessee's business tax laws to exempt certain prescription drugs and related services from taxation if their cost exceeds a specific Medicare threshold.

What This Bill Does

• Removes prescription drugs and patent medicines that exceed the Medicare Part D specialty tier cost threshold for a 30-day supply from being taxed under classification two.
• Exempts services needed to prepare, store, handle, administer, educate about, or monitor these exempted drugs after sale from business taxes.

Who It Names or Affects

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

Terms To Know

Medicare Part D specialty tier cost threshold

A specific cost level set by Medicare for certain high-cost prescription drugs.

30-day equivalent supply

The amount of a drug needed to last one month for the prescribed use.

Limits and Unknowns

• The bill does not specify how much revenue will be lost due to these exemptions.
• It is unclear if there are similar exemptions in other states or federal laws that this might affect.

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

HOUSE BILL 767
By Hicks G

SENATE BILL 907
By Haile

SB0907
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.