Delaware, Minnesota, New York, and Rhode Island have all enacted legislation to counter the costs associated with the abuse of prescription and illicit opioids. It is expected that more states will enact similar legislation—whether in the form of a tax, a fee, or a licensing requirement. Each state will present varying compliance challenges for affected clients because of the different approaches to opioid taxation that they have taken.
Although only Delaware, Minnesota, and New York enacted opioid-related measures in 2019, and Rhode Island in 2020, twelve other states considered similar legislation over the previous three-year period. The approaches taken by the states in the enacted measures and proposals from 2017-2019 include excise taxes, value-based taxes, gross receipts taxes, and substantial license fees.
State approaches vary with respect to price point, terminology, and compliance requirements:
Impact fee on opioid manufacturers
- Prescription opioid: $0.0100 per morphine milligram equivalent (MME)
- Generic opioid: $0.0025 per MME
State determines liability based on data provided through the Prescription Monitoring Program (PMP). Information obtained through the PMP is transmitted to the Secretary of State on a quarterly basis.
Registration fee on opioid manufacturers
- Selling, delivering, or distributing 2 million or more units of an opiate: $250,000
Manufacturers and wholesalers are required to submit a report to the Board of Pharmacy on an annual basis. The Board of Pharmacy notifies manufacturers if a registration fee is owed.
Excise tax on opioid registrants on first sales in the state
- Wholesale acquisition cost of opioid
- Less than $0.50 per unit: $0.0025 per MME
- More than $0.50 per unit: $0.0150 per MME
Registrants are required to determine tax due and file quarterly returns with the state. There are registration requirements with the Department of Education and the Department of Health (DOH). Annual report due to DOH.
Annual registration fee based on in-state market share
- Estimated $5 million annual revenue to the state, split among opioid licensee’s
The Department of Health notifies each manufacturer, distributor, and wholesaler, on or before October 15th of each year, regarding the licensee’s in-state market share and related fee amount based on the amount of opioids sold or distributed in the prior calendar year. The licensee must remit the fee by December 31 of the given year.
Taxpayers should consider the following steps in preparing to comply with existing laws and new proposals:
Develop a cross-functional approach
Identify compliance information gaps
Develop a compliance strategy
Monitor state developments