Texas’ tax break on con­doms long gone

Austin American-Statesman - - METRO & STATE - By W. Gard­ner Selby wgselby@states­man.com

An Austin leg­is­la­tor talk­ing up her pro­posal to ex­empt fem­i­nine hy­giene prod­ucts from the state sales tax as­serted that con­doms were sold tax-free in Texas for a spell.

Demo­cratic state Rep. Donna Howard, speak­ing to re­porters for the Dal­las Morn­ing News dur­ing a Face­book Live pre­sen­ta­tion, brought up con­dom tax his­tory just af­ter sug­gest­ing that ever-costly di­a­pers also shouldn’t be sub­ject to the state sales tax of 6.25 per­cent (lo­cal govern­ments are al­lowed to levy up to 2 per­cent more of sales tax).

Con­doms, Howard went on, “used to be tax-ex­empt here in Texas un­til we changed some­thing in the statute; the word­ing was such that it ... put them back out there where they were taxed.”

We won­dered about that, ul­ti­mately find­ing that changes in law against a gov­er­nor’s wishes re­sulted in a type of con­dom not be­ing sub­ject to sales tax for more than seven years.

To gauge this claim, we mostly re­lied on the Texas state comptroller’s of­fice, which over­sees state tax col­lec­tions. Spokes­woman Lau­ren Wil­lis pointed out that a tax-cut pack­age signed into law by Gov. Ge­orge W. Bush in 1999 in­cluded lan­guage ex­empt­ing con­doms from the Texas sales tax.

Wil­lis emailed us a web link to a March 2000 news story stat-

ing that con­trary to Bush’s cam­paign-trail in­ten­tions, con­doms would soon rank among prod­ucts not sub­ject to the state sales tax. Start­ing April 1, 2000, the news story said, “Tex­ans won’t have to pay sales tax on non-pre­scrip­tion med­i­ca­tions, oint­ments to treat sun­burns, lax­a­tives or con­doms.”

Be­fore his re-elec­tion in 1998, Bush had pro­posed a $400 mil­lion tax-cut pack­age in­clud­ing a sales tax break on over-the-counter health items.

Bush said in Septem­ber 1998 that his pro­posed tax cut wouldn’t ex­tend to non­pre­scrip­tion con­tra­cep­tives, in­clud­ing con­doms. “The gov­er­nor is be­ing touted by some in the GOP as a po­ten­tial pres­i­den­tial can­di­date in 2000,” the Morn­ing News re­ported, “and some so­cial con­ser­va­tives have taken a strong stand against promis­cu­ity and pre­mar­i­tal sex.”

But in March 2000, state Comptroller Ca­role Keeton Ry­lan­der an­nounced she had no choice but to in­clude con­doms among items made tax-ex­empt in the tax-cut mea­sure passed into law the year be­fore. Call­ing her de­ci­sion a “mat­ter of law,” Ry­lan­der pointed out the new law re­quired a drug, medicine or health care prod­uct to be ex­empt from taxes if it has a drug code num­ber is­sued pur­suant to FDA reg­u­la­tions. Na­tional drug codes, or NDCs, are three-digit seg­ments that serve as univer­sal prod­uct iden­ti­fiers, the FDA says.

A March 2000 Hous­ton Chron­i­cle news story said the leg­is­lated tax ex­emp­tion would ap­ply to all 100,000 non­pre­scrip­tion prod­ucts car­ry­ing an NDC.

That story noted that the orig­i­nal leg­is­la­tion, Se­nate Bill 441 by state Sen. Rod­ney El­lis, D-Hous­ton, would have ex­empted only chil­dren’s non­pre­scrip­tion medicines from the sales tax but was ex­panded in Se­nate-House ne­go­ti­a­tions to in­clude adult over-the-counter medicines — with the FDA code lim­i­ta­tion in­tended to pre­clude tax breaks for herbal and folk reme­dies not sanc­tioned by that agency.

When we checked with the FDA about con­doms hav­ing NDCs, spokes­woman Deb­o­rah Kotz replied that the agency con­sid­ers con­doms to be “de­vices” that don’t need NDCs, un­like medicines. Kotz told us, though, that some con­dom man­u­fac­tur­ers have put NDCs on con­doms sold over the counter, “of­ten for re­im­burse­ment pur­poses.” Some con­doms, Kotz said, still have the numbers.

Wil­lis said, and we con­firmed, that the NDC lan­guage was re­moved by a 2001 law. Yet Se­nate Bill 1125 left sper­mi­ci­dal con­doms tax-ex­empt by si­mul­ta­ne­ously adding lan­guage ex­empt­ing prod­ucts “la­beled or re­quired to be la­beled with a ‘Drug Facts’ panel in ac­cord” with FDA reg­u­la­tions. Kotz told us con­doms, mostly reg­u­lated as de­vices and not as medicines, might have “facts” pan­els, but the FDA hasn’t re­quired them to do that.

A 2007 change in law lim­ited items ex­empt from the sales tax to prod­ucts re­quired to have the “Drug Facts” pan­els, Wil­lis told us, which ended the con­dom tax ex­emp­tion as of Septem­ber 2007.

In the past fis­cal year through Au­gust 2016, Wil­lis said, the state sales tax on con­doms yielded an es­ti­mated $7 mil­lion in rev­enue.

Our rul­ing

Howard said con­doms “used to be tax-ex­empt here in Texas.”

Un­der a tax-cut mea­sure ap­proved by law­mak­ers and Bush in 1999, con­doms con­tain­ing sper­mi­cide were ex­empt from the state sales tax start­ing in April 2000. An­other change in law ended that ex­emp­tion as of Septem­ber 2007.

We rate the claim True.

Con­tact W. Gard­ner Selby at 512-445-3644. Twit­ter: @gard­nerselby @poli­ti­fact­texas


State­ment: Says con­doms “used to be tax-ex­empt here in Texas.”

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