Publication 27, Drugstores
Other Drugstore Sales

As a drugstore operator, you most likely sell items in addition to medicines and medical supplies. This page explains how tax applies to those other sales.

Taxable and nontaxable sales–an overview

Taxable sales

The following are examples of drugstore sales that are generally subject to tax:

• Alcoholic beverages
• Books, newspapers, and periodicals
• Cameras and film
• Carbonated and effervescent water, including sparkling mineral water
• Carbonated soft drinks and mixes
• Clothing
• Cosmetics
• Dietary supplements
• Hot prepared food products, and food sold for consumption on your premises (for more information, visit publication 31, Grocery Stores)
• Ice
• Medicated gum (for example, Nicorette and Aspergum)
• Medical supplies such as bandages, thermometers, and hypodermic needles (refer to medical supplies that are not considered medicines)
• Over-the-counter medicines (refer to over-the-counter medicines)
• Pet food, pet medicines, and supplies
• Soaps or detergents
• Sporting goods
• Tobacco products
• Toys, hardware, and household goods

Notes

1. Sellers of cigarettes and tobacco products at retail must have a separate California Cigarette and Tobacco Products Retailer’s License for each retail location. This is true even if you have a seller’s permit or other permits or licenses issued by us. For more information, visit publication 78, Sales of Cigarettes and Tobacco Products in California.

Nontaxable sales

The following are examples of drugstore sales that are generally not taxable:

• Food products (unless sold for consumption at your place of business or sold as hot prepared foods). This includes baby food, artificial sweeteners, candy, gum, ice cream, ice cream novelties, popsicles, fruit and vegetable juices, olives, onions, and maraschino cherries. Food products also include beverages and cocktail mixes that are not alcoholic or carbonated. The exemption applies whether the beverage or mix is sold in liquid or frozen form.
• Water, including bottled noncarbonated, non-effervescent drinking water.
• Sparkling cider and other naturally carbonated products; refer to carbonated fruit juices under food product sales (below).
• Baby formulas.
• Noncarbonated sports drinks (refer to dietary supplements provided by physicians)
• Granola bars, candy bars, and food bars.

Please refer to the Additional Information section for information about the regulations, guides, and publications referenced in this publication.

Food product sales

Food items that people eat are generally not taxable. If an item does not qualify as a food product, it is generally subject to tax. For more information, visit Regulation 1602, Food Products, and Regulation 1603, Taxable Sales of Food Products.

For example, the following items are not considered food products and are subject to tax:

• Alcoholic beverages
• Carbonated beverages and mixes (refer to carbonated fruit juices below)
• Coloring extracts
• Dietary supplements (visit Regulation 1602, Food Products)
• Ice
• Tobacco products

Please note: Carbonated fruit juices. Carbonated products that qualify as 100 percent natural fruit juice are not subject to tax. If the fruit juice includes a preservative, such as sodium benzoate, or any other additive, it is not considered a natural fruit juice and is subject to tax.

Sales of hot prepared foods and food operation sales

If you sell hot prepared food products (such as hot sandwiches), or you operate a food service (such as a soda fountain), visit publication 31, Grocery Stores, or publication 22, Dining and Beverage Industry.

Combination packages (packages that include a combination of food products and nonfood products)

If you sell a combination package that includes exempt food products and nonfood products, visit Regulation 1602, Food Products, and publication 106, Combination Packages and Gift-Wrapping, for an explanation of how tax applies to sales of combination packages.

Food or dietary supplements or additives

Sales tax generally applies to preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill forms sold as food supplements, dietary supplements, food additives, or dietary additives. Supplements or additives are not included in the definition of exempt food products. If an item is sold in one of these specified forms, the following methods may be used to determine its taxability:

• If an item is described on its label or package as a food supplement, food additive, dietary supplement, or dietary additive, its sale is subject to sales tax.
• If an item is prescribed or designed to remedy specific dietary deficiencies or to increase or decrease generally those areas of human nutrition dealing with vitamins, proteins, minerals, or calories, its sale is subject to sales tax.
• If an item is in one of the specified forms, it may be taxable if it is generally recognized as a dietary supplement, even though it is not described as such on its package and does not emphasize its vitamin, protein, mineral, or calorie content. Examples include cod liver oil, wheat germ oil, and halibut liver oil.

Dietary supplements provided by physicians

Generally, if a supplement does not qualify as a complete dietary food under Regulation 1602, Food Products, it is subject to tax. However, Regulation 1602 and Regulation 1591, Medicines and Medical Devices, clarify that dietary supplements can, in limited circumstances, be considered "medicines." This applies when supplements (provided by a physician to their own patient) are part of a medically supervised weight loss program to treat obesity.

Herbal products

For purposes of the food products exemption, a product’s labeling does not determine if it is a medicine and may be disqualified from the food products exemption. If a product does not meet the definition of medicine, as provided in Regulation 1591, it may still be considered a food product for human consumption (food items that people eat). This is true even if medicinal claims are made on the product’s label or product brochures.

If an herb is sold in cut leaf form, it cannot be considered a supplement or additive, regardless of what is written on the label, because it is not in one of the forms listed in Regulation 1602. Only a dried herb that is ground or crushed into fine particles should be considered a powder. For such an herb to be considered sold as a supplement or additive, it must either be:

• Labeled as a supplement or additive, or
• Prescribed or designed to meet specific dietary deficiencies or increase or decrease vitamins, proteins, minerals, or caloric intake.

If the herb is not described on its package or label as a food supplement, food additive, dietary supplement, or dietary additive, the herb is a food product, the sale of which is exempt from tax.

Snack foods, candy, and confectionery

Sales of snack foods, candy, and confectionery are not taxable.

Water

Bottled water

Sales of carbonated, effervescent bottled water are taxable. Sales of noncarbonated, noneffervescent drinking water are not taxable. However, the sale of bottled distilled water is taxable because it is generally used for purposes other than drinking, for example, filling steam irons and car batteries. When bottled water is not sold for human consumption, its sale is taxable.

Read the label. To determine whether your sale of distilled water is taxable, examine the bottle’s label. If the label includes a reference that the distilled water is intended for human consumption (drinking), the sale of the water qualifies for exemption as a food product. If the distilled water label does not reference intended use or is labeled only for nonfood uses, the sale of the water is taxable.

Purified water sold through dispensers

Sales of purified drinking water dispensed through vending machines are exempt, provided the water enters the vending machine through local supply lines and is dispensed into the customer’s own container.

Vitamin-enhanced water

Noncarbonated and vitamin-enhanced water and sport drinks that come in packages similar in size and volume to nonenhanced bottled water are generally considered food products. Your sales of these products on a to-go basis are not subject to tax. Noncarbonated bottled water is specifically considered a food item. The special mixing or compounding of nutritional elements, such as vitamins, in an item traditionally accepted as food, such as vitamin-enriched bread, does not alone render the product taxable, nor does including the word "vitamin" in a food product name, description, or product advertising. For more information, visit Regulation 1602.

California redemption value (CRV) (recycling fee)

Notes

1. CRV applies to beverages listed in this column when they are sold in glass, plastic, aluminum, and certain other metal containers. The beverages must be in liquid, ready-to-drink form and intended for people to drink. Effective January 1, 2024, CRV also applies to additional container types for sales of wine, wine coolers, distilled spirits, and distilled spirit coolers.
2. Prior to January 1, 2024, specified alcoholic beverages, vegetable juice in containers of more than 16 ounces, and 100 percent fruit juice in containers of 45 ounces or more were not subject to the CRV (visit SB 1013 (Stats. 2022 ch. 610)). Also, visit CalRecycle for more information.

If the sale of the beverage is subject to tax (for example, beer and soda), the redemption value is also subject to tax. Tax applies to the amount received from the sale of a beverage, its container, and the amount charged for the redemption value of the container. The redemption value is not considered a deposit under the Sales and Use Tax Law and may not be deducted from total taxable sales on your tax return. If the sale of the beverage is exempt from tax, so is the redemption value.

Please Note The CRV program is administered by the California Department of Resources, Recycling, and Recovery (also known as CalRecycle), a branch of the California Environmental Protection Agency. If you have questions regarding the recycling fee rate or what products are covered by the fee, visit the Department of Conservation website at www.calrecycle.ca.gov.

Diapers and Menstrual Hygiene Products

As of January 1, 2020, the sale and use of specified diapers and menstrual hygiene products are exempt from tax. Specified diapers and menstrual hygiene products only include:

• Diapers that are designed, manufactured, processed, fabricated, or packaged for use by infants, toddlers, and children, and
• Tampons, sanitary napkins primarily designed and labeled for menstrual hygiene use, menstrual sponges, and menstrual cups.

You should continue to include your sales of these items in the reported total gross sales on your sales and use tax return and claim the deduction as diapers and menstrual hygiene products for your sales on and after January 1, 2020.

Sales or purchases of breast pumps and related supplies

Beginning April 1, 2024, through March 31, 2029, the sale or purchase of breast pumps and related supplies are exempt from tax. Revenue and Taxation Code section 6370.2 defines the qualifying products:

• A breast pump is an electrically or manually controlled pump device designed and marketed to be used to express milk from a human breast during lactation and includes the electrically or manually controlled pump device and any battery, alternating current (AC) adapter, or other power supply unit packaged and sold with the pump device at the time of sale to power the pump device.
• Breast pump collection and storage supplies are those items designed or marketed to be used in conjunction with a breast pump to collect milk expressed from a human breast and store collected milk until it is ready for consumption, and include, but are not limited to:
  1. Breast shields and breast shield connectors.
  2. Breast pump tubes and tubing adapters.
  3. Breast pump valves and membranes.
  4. Backflow protectors and backflow protector adaptors.
  5. Bottles and bottle caps that are specific to the operation of the breast pump.
  6. Breast milk storage bags.
  7. Other items that may be useful to initiate, support, or sustain breastfeeding using a breast pump during lactation that may be sold separately but are generally sold as part of a breast pump kit.
• A breast pump kit includes a breast pump and one or more of the following items:
  1. Breast pump collection and storage supplies.
  2. Other items that may be useful to initiate, support, or sustain breastfeeding using a breast pump during lactation that, so long as the other items sold with the breast pump kit at the time of the sale are less than 10 percent of the total sales price of the breast pump kit.
• Breast pads

Please note that "breast pump collection and storage supplies" does not include the following items if not sold as part of a breast pump kit prepackaged by the breast pump manufacturer or distributor:

1. Bottles and bottle caps not specific to the operation of the breast pump.
2. Breast pump travel bags and other similar carrying accessories, including ice packs, labels, and other similar products.
3. Breast pump cleaning supplies.
4. Nursing bras, bra pads, breast shells, and other similar products.
5. Creams, ointments, and other similar products that relieve breastfeeding-related symptoms or conditions of the breasts or nipples.

If you sell qualifying breast pumps and related supplies, you should continue to report your sales of these qualifying items in your reported total gross sales on your sales and use tax return. You may then claim the deduction for these qualifying sales on your return. Under Nontaxable sales (deductions), Other Nontaxable Sales, select Other and input "breast pumps" or "breast pump-related supplies" under Description.

Film processing

Tax generally applies to all charges involved in processing film except for the following:

• Charges for tinting or coloring photographs that are furnished by the customer.
• Separately stated charges for developing color or black and white negatives. This is to be distinguished from charges for developing film by the reverse process method, which is taxable. (The reverse process method consists of developing the film to a negative and reversing it into a positive, usually in the form of a slide or a home movie film.)

Point-of-sale fees (fees for the use of debit cards)

Tax does not apply to debit card fees if all the following conditions apply:

• The fee is separately stated,
• The customer would not incur the charge if they did not use the card,
• The fee is not calculated as a percentage of the amount of the purchase, and
• The fee is reasonably related to the cost of the transaction.

Prepaid telephone debit cards and prepaid wireless cards

In general, sales of prepaid telephone debit cards are not taxable (refer to exception, below). You are selling a future telephone service rather than selling physical products. However, sales of telephone cards that include prepaid wireless airtime are subject to the Emergency Telephone Users (911 and 988) Surcharges when sold in a retail transaction in California. For more information about this program, visit our online Tax Guide for Sellers of Prepaid Mobile Telephony Services (MTS) and Telecommunication Service Suppliers.

Exception: If you sell a prepaid telephone card for its value as a collectible item rather than for future telephone service, the sale is subject to tax. For example, if you sell an expired card with a picture of a famous person or a "classic" automobile, you are selling a collectible item, and the sale is subject to sales or use tax.

Electronic devices

Sales of electronic devices are subject to sales and use tax. In addition to sales and use tax, products that contain video displays measuring more than four inches diagonally are also subject to the Electronic Waste Recycling Fee. For more information about this program, visit publication 95, Electronic Waste Recycling Fee.

Lottery

California lottery sales are not taxable and should not be included as part of your total taxable sales on your sales and use tax return. Make sure to segregate lottery receipts from other sales in your records. If you do not adequately document lottery receipts, such sales could be confused with taxable sales.

Newspapers, periodicals, magazines, and books

Sales of newspapers, books, magazines, and periodicals are generally taxable. Tax also applies to sales of catalogs, maps, and books. You should include these items as part of your reported taxable sales.

Carpet cleaners

Your charges for renting carpet cleaning equipment are taxable unless:

• You paid an amount for California sales tax or use tax to your supplier when you purchased the equipment, or
• You reported the purchase of the equipment on your sales and use tax return and paid use tax on that amount no later than the reporting period in which you first began renting the equipment.

You also owe tax on separate charges for soap and cleansers. If you charge tax on soap and cleansers, you can buy them using a resale certificate.

Sales of capital assets

Sales tax applies to retail sales of capital assets such as showcases, gondola shelving, and cash registers that have been used in your business. This holds true whether the assets are sold intermittently or are included with the sale of your business.

Vending machines

Commissions received from vending machine operators who have placed vending machines on your premises are not subject to tax. Some retailers, however, sell their own merchandise through vending machines. Publication 118, Vending Machine Food Sales, explains the application of tax to sales through vending machines.

Discounts, coupons, rebates, and incentive programs

If you participate in rebate or incentive programs offered by manufacturers, vendors, or other third parties to promote sales of specific products, you should be aware of how tax applies to the payments you receive.

In general, third parties offer incentive programs to reduce the selling price of their specific products. The third party will compensate you directly for the selling price reduction given to your customers when these products are sold at the reduced rates. There are also incentive programs in which you enter into a third-party agreement to reduce the retail selling price in exchange for a purchase discount on your cost of the product.

When is the rebate or incentive payment taxable?

If all these conditions exist as part of the incentive program, the third-party payment is part of your total taxable sales. When reporting your sales, you must include the total amount you receive from your sales of the particular products—this includes the amount paid by the customer and the amount that will be paid by the third party as reimbursement for the price reduction.

Here are two examples where the value of a buy-down rebate program and a manufacturer coupon are part of your total taxable sales (or sales price if subject to use tax) from the sale of the product:

1. You purchase bottle openers directly from the manufacturer, and you enter into a buy-down rebate program with them. Assume you normally sell the bottle openers for $5.00, but under a buy-down rebate plan, agree to sell the bottle openers for $4.50 and receive $0.50 from the manufacturer. The tax amount due is based on your "total taxable sales" for the sale–which includes both the rebate amount and the amount paid by your customer; therefore, tax is due based on the $5.00 you receive for the entire sale.
2. A customer clips a coupon out of a newspaper and presents it to you at the time of sale to receive a discounted price on the product purchased. The coupon indicates "manufacturer coupon." Since the manufacturer will compensate you for the amount of the price reduction and the customer presents a manufacturer coupon to you, the value of the coupon is included in your total taxable sales. Tax is based on the full retail selling price of the product—that is, the amount paid by your customer and the amount of the manufacturer’s coupon.

Promotional programs offered by third parties

When you participate in a promotional program, the payments you receive from a person other than your customer are presumed taxable until you can present documentation to establish the payments as being nontaxable. Visit Regulation 1671.1, Discounts, Coupons, Rebates, and Other Incentives, for examples of documentation that are used to accomplish this.

Also, when you collect sales tax, or if you are required to collect use tax, you must let the customer know the amount on which they are paying tax. This includes the amount of any taxable discounts, rebates, or incentives offered or paid to you by third parties. In other words, even though the customer buys an item at a discounted price, you collect tax for the full retail (pre-discounted) price. You may itemize this amount on the customer’s receipt, sales invoice, or other proof of sale.

When applicable, you may also post a notice in a location visible to your customer or in advertisements, flyers, or brochures sent to customers. The notice should indicate that "tax" will be added to the sales price of all items and that the tax includes the amount of any taxable discounts or rebates.

Discount club cards

If you offer price discounts to customers through discount club cards that are provided at no charge, the discount amount is not subject to tax. The price reductions associated with the club card are not part of your total taxable sales if you are not receiving compensation from a third party. Amounts paid by a third party, such as a manufacturer, to reimburse you for the club card discount are taxable. Some stores also offer "club rewards"—such as discount coupons or "reward bucks"—based on a customer’s purchases during a particular time period. These reward discounts are also not taxable because they are considered retailer cash discounts.

For additional information and examples of programs commonly offered by third parties, visit Regulation 1671.1, Discounts, Coupons, Rebates, and Other Incentives, and publication 119, Warranties and Maintenance Agreements.

EBT CalFresh Benefit

CalFresh is known federally as the Supplemental Nutrition Assistance Program (SNAP) and provides benefits to qualified individuals who meet federal income eligibility rules. Electronic Benefits Transfer (EBT) cards containing CalFresh benefits are issued to qualified individuals by their respective county’s human or social services department. CalFresh benefits may be used by qualified individuals to purchase eligible food items at authorized retail food stores. Sales of eligible food items purchased with CalFresh benefits are exempt from tax, even if the sale of the food item is normally taxable. For example, the sales of carbonated beverages, ice, and food coloring are exempt from tax when purchased with CalFresh benefits.

If your customer has CalFresh benefit redemptions that exceed the total amount of eligible taxable food items, the remainder should be applied only to nontaxable food items. Tax applies to all sales of taxable items that are not eligible to be purchased with CalFresh benefits.

Under SNAP, items purchased with CalFresh benefits are considered to be sold to the United States government and are exempt from tax in California. However, items purchased with CalWORKs cash aid benefits are not considered sales to the United States government and are subject to tax, unless another exemption applies.

You are allowed to take a sales and use tax deduction for CalFresh benefits redeemed. You may report the deduction of CalFresh benefit sales on an actual basis (itemization of sales including CalFresh benefit sales) if you separately account for those sales.

Alternatively, there are two approved methods for computing the allowable deduction instead of separately accounting for CalFresh benefit sales:

Method 1

You may take a deduction on your sales and use tax return of two percent of the total amount of CalFresh benefits redeemed during the period for which the return is filed.

Method 2

You may take a deduction of a greater percentage if the total of taxable items purchased with CalFresh benefits divided by the total of taxable items purchased with CalFresh benefits plus exempt food purchases is greater than two percent. Refer to example below:

Allowable percentage for CalFresh benefits deduction: (a) $5,000 ÷ (c) $135,000 = 3.7%

Customers may not use CalFresh benefits to buy items such as alcoholic beverages, tobacco products, pet food, soaps, paper products, vitamins, food that will be eaten in the store, or hot foods. If you are using Method 2, please ensure that these items are not included in your total of items that are normally taxable and may be purchased with CalFresh benefits.

Bad debt deductions

If a check you accepted for a taxable sale is returned unpaid by the bank for insufficient funds, and you find it to be uncollectible and write it off for income tax purposes, you may claim a bad debt deduction for the amount of the taxable sale. Please refer to Regulation 1642, Bad Debts, to assist you in calculating the taxable portion of your bad debt losses. You must claim the deduction on the sales and use tax return for the reporting period in which you found the check worthless and wrote it off. Enter the amount under Bad debt losses on taxable sales. Otherwise, you must submit a claim for refund on the amount found to be worthless. You can take the bad debt deduction only if you had previously reported tax on the sale on a previous return.

If you later collect the money due for a bad debt (for example, worthless checks), any amount you previously claimed as a deduction must be reported as a taxable sale. You cannot deduct amounts you paid to collect the funds due.

Credit sales. You can also claim a bad debt deduction on uncollectible credit sales, subject to certain adjustments. For more information, visit Regulation 1642.

Tax rate changes. If the tax rate has changed since you made the sale, you must make an adjustment in the deduction you claim. Visit California City and County Sales and Use Tax Rates for current tax rates. For assistance, you may contact our Customer Service Center at 1-800-400-7115 (TTY:711).

Robbery, theft, or shoplifting

You are required to pay tax on all your taxable sales despite any loss of the proceeds (cash, check, or credit card). You may not take a taxable sales deduction for a loss due to robbery, theft, or shoplifting.

Although you cannot deduct such losses on your sales and use tax return, you must document them in your records. In the event you are audited, you must be able to account for all your income and inventory. Acceptable forms of documentation of inventory loss due to robbery, theft, or shoplifting include police reports, insurance claims, reports from private investigating agencies, etc.

Sales suppression software programs and devices

It is a crime for anyone to knowingly sell, purchase, install, transfer, or possess software programs or devices that are used to hide or remove sales and to falsify records.

Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years of imprisonment, fines of up to $10,000, and will be required to pay all illegally withheld taxes, plus penalties, applicable interest, and fees.

Revision October 2026