State Eliminates Sales Tax on Over-the-Counter Medicines
The tax change may not impact consumer behavior too much.
The state has eliminated its sales tax on certain non-prescription medicines. The change will eliminate taxes on over-the-counter items like antacids, cough syrup, and pain medication. It also gets rid of the sales tax on dietary supplements and vitamins.
All this stuff was tax free when Governor Dannel Malloy took office over four years ago, but the state started taxing it in recent years to help close the budget gap.
Kevin Sullivan runs revenue services for the state. And even though projected revenues right now can't keep up with anticipated expenses, he said Malloy made eliminating this tax a priority.
"First of all, it's a sales tax, so it's inherently regressive," Sullivan said. "Second of all, many people rely on over-the-counter medications for basic health care. For them, there's no difference between a tax-exempt prescription drug and a taxable over-the-counter drug."
Connecticut -- along with Massachusetts, New York, and Rhode Island -- doesn't tax prescription drugs. Now that the state's sales tax on non-prescription drugs is gone, it joins Vermont and New York as the other states in the region to make these types of purchases tax-free.
"If you're sick, you're going to go straight to your neighborhood pharmacist and get something so that you can feel better," said Nicholas Lurie, an associate professor at UConn who studies marketing.
Lurie thinks the tax change won't impact consumer behavior too much.
"To the extent that [consumers] think about price, they're probably going to focus on the price on the shelf as opposed to the sales tax rate, "Lurie said. "That being said, there may be some effects in the sense that we might see consumers coming from neighboring states to Connecticut to buy planned purchases of nutraceuticals and over the counter vitamins and things like that ... but it's not going to be a huge number of consumers."
The sales tax exemption went into effect on April 1.