AVMA challenges 'fairness' of Internet sales tax moratorium

NATIONAL REPORT — In a move to help veterinary practices become more competitive with online pharmacies, the AVMA threw its support to abolishing a federal moratorium on Internet sales taxes to out-of-state customers.

The Executive Board of the American Veterinary Medical Association (AVMA) okayed the position statement at its summer meeting.

The board adopted the policy for two reasons—fairness and quality control, says Dr. John DeJong, DVM, District I of the AVMA Executive Board.

"This definitely affects companion-animal practices," DeJong says. "All veterinarians in private practice are affected at some level."

Currently, a federal moratorium on taxing Internet transactions is considered to give online pharmacies a competitive edge, allowing them to charge less than most veterinary practices.

Congress has blocked state and local governments from levying sales taxes on Internet transactions and certain other forms of electronic commerce since the late 1990s, according to AVMA. Lawmakers have since extended the law three times, most recently with the Internet Tax Freedom Act Amendments Act of 2007, which continued the sales-tax moratorium through Nov. 1, 2014.

The AVMA State Advocacy Committee, which proposed the new position statement, explained in its recommendation to the Executive Board that veterinary clinics in many states selling drugs on-site must charge sales tax, while Internet pharmacies can sell the same drugs across state lines at cheaper prices because they aren't subject to the same tax requirements.

This price advantage for online retailers ranges from 4 percent to 9.75 percent, depending on state and local sales tax laws, the committee reports.

DeJong estimates about 10 percent of his housecall practice, Boston Mobile Veterinary Clinic, is made up of pharmaceutical sales. "It's not huge, but it is considerable," DeJong says of the heartworm, antibiotic and steroid prescriptions he fills.

"Veterinarian incomes are down throughout the country," he adds.

Brian Maxwell, DVM, of the Adobe Animal Hospital in Los Altos, Calif., says pharmacy sales are a significant part of the Silicon Valley practice. "It isn't a small amount, that's for sure," he says.

Internet pharmacies affect practice to a degree. Many practices, he says, are trying to match prices on commodities like heartworm medication and flea treatments. But it's more difficult to match drug prices, Maxwell adds. Typically, clients try to purchase the longer-term medications online, and Maxwell doesn't blame them, comparing it to an elderly grandmother on a fixed-income in need of medication. The AVMA's new policy would just make the online pharmacies "a little less able to undercut everybody's prices," Maxwell says.

"From a veterinarian's perspective, it's a good thing," he says. "But from a consumer's perspective, it's probably a bad thing. I can understand why people need to get it cheaper. Everyone needs to figure out where they are going to make money. I wouldn't want to prevent people from getting a better deal."

Maxwell and DeJong agree that another issue that comes with Internet pharmacy sales is the need for adequate documentation, which can be problematic to say the least. As a large practice, Adobe Animal Hospital receives about 20 requests a week from Internet pharmacies, and they can be fairly aggressive, Maxwell says. If the requests aren't promptly returned, the pharmacy contacts the client and that usually leads to angry phone calls to the veterinary clinic, he says.

"It's not a very cohesive relationship," according to Maxwell.

While some veterinarians refuse to sign the requests, or charge for the requests, that's not the case at Adobe. Sometimes requests are missed, or simply not received.

"If fewer people used Internet pharmacies, that would definitely be alleviated," Maxwell says. "If (Internet sites) were forced to charge a sales tax, there would be less of a financial reason for people to go to them. Any decrease in the number of prescriptions we have to fax out would be a plus for us."

The issue of quality control is also difficult to get a handle on with online pharmacies. Veterinarians cannot guarantee the prescription or dosage if it is not dispensed from the clinic, according to DeJong.

"For veterinarians, it's a change in the long-standing paradigm," Maxwell concludes. "It's competition, and some people don't like it. It's change."