Appeal from the Order of the Board of Finance and Revenue in the case of Commonwealth of Pennsylvania, Department of Revenue v. Lamar T. Zimmerman, M.D. and Doris Zimmerman, No. RST-3027.
R. James Reynolds, Jr., with him John B. Huffaker, Pepper, Hamilton & Scheetz, for petitioner.
Christos A. Katsaounis, Assistant Attorney General, for respondent.
President Judge Crumlish, Jr. and Judges Rogers, Blatt, Craig and MacPhail. Opinion by Judge MacPhail.
[ 68 Pa. Commw. Page 337]
This Petition for Review filed by Lamar T. Zimmerman (Petitioner) challenges an order entered by the Board of Finance and Revenue (Board) upholding an assessment of $164,351.43 by the Department
[ 68 Pa. Commw. Page 338]
of Revenue (Department) against Petitioner comprised of a sales tax deficiency, a tax evasion penalty, a late filing penalty and interest for the period of January 1, 1976 to July 31, 1977. A partial stipulation of facts was entered into by counsel for both parties and filed with this Court on December 4, 1981. On February 1, 1982, this Court entered an order granting bifurcation of this matter into argument on legal issues followed, if necessary, by litigation of the actual amount of tax liability. The resolution of the legal issues is presently before this Court.*fn1
The alleged sales which are the subject of this assessment involve sales of the drug methaqualone. Methaqualone*fn2 is a drug listed in Schedule II of the Pennsylvania Schedules of Controlled Substances, 28 Pa. Code § 25.72(c)(6)(iv). As such, it may not be dispensed without a written prescription, except when dispensed directly to a patient by a practitioner. Section 11(a) of The Controlled Substance, Drug, Device and Cosmetic Act, Act of April 14, 1972, P.L. 233, as amended, 35 P.S. § 780-111(a). Petitioner concedes that any sales made by him of methaqualone relevant to this case were made illegally.
The initial issue which we must determine is whether such illegal sales are subject to tax in view of Section 204(17) of the Tax Reform Code of 1971 (Tax Code), Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7204(17), which provides: "The tax imposed by [this Article] shall not be imposed upon . . . (17) The sale at retail or use of prescription or non-prescription medicines, drugs or medical supplies. . . ." The word "drugs," we note, is modified by the words "prescription or non-prescription." Therefore,
[ 68 Pa. Commw. Page 339]
we must determine whether these alleged methaqualone sales were sales of prescription or non-prescription drugs.
Non-prescription drugs are those drugs typically referred to as "over the counter drugs." By definition an over the counter drug is one "capable of being sold legally without the prescription of a physician, dentist or veterinarian." Webster's Third New International Dictionary 1611 (1966). As previously noted, methaqualone is a Schedule II drug which requires a ...