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CIBA Vision Corp. v. Jackson

Free samples of contact lenses given to eye-care professionals are subject to taxation under O.C.G.A. § 48-8-39.

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CIBA Vision Corporation, a Delaware corporation, manufactures contact lenses in Georgia and also warehouses in Georgia ophthalmic drugs that were purchased out of state. As a part of its marketing strategy, CIBA gives away free samples of these items to licensed dispensers throughout the world. CIBA paid Georgia sales and use tax on these transactions from 1992 to 1996 the “Refund Period” totaling $2,558,234. In 1998, CIBA requested a refund contending that distribution of free samples is exempt from the tax. The trial court granted summary judgement in favor of the State, holding that as a matter of law, the transactions were taxable. CIBA appeals and argues that the case law relied upon by the trial court should be disapproved or overruled.1

During the Refund Period, CIBA manufactured and packaged contact lenses in Gwinnett County and stored them in a facility in Fulton County. Sample lenses were labeled “not for resale,” were stored separately and were given to eye-care professionals located in Georgia and elsewhere. In most cases, CIBA simply mailed them to requesting eye care professionals who, in turn, would use them to demonstrate the product for the patient, to test their fit on the patients, and to test the patients’ tolerance for the lenses. But in some cases, CIBA gave the sample lenses to sales representatives who in turn gave them to eye-care professionals. The sales representatives would sometimes open the packages during sales calls to demonstrate the characteristics of the product. Approximately 90 of CIBA’s refund claim derives from distribution of free contact lenses.

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