State v. Dunhall Pharmaceuticals, Inc.

Robert H. Dudley, Justice. The sole issue on appeal is whether the free distribution of samples of prescription products by the appellee, Dunhall Pharmaceuticals, Inc., is subject to a sales tax. The trial court held the distribution was not taxable. We affirm. The Arkansas Gross Receipts Tax is applicable when there is a transfer of either title or possession for a valuable consideration. Ark. Stat. Ann. § 84-1902 (Repl. 1980). Obviously, when the samples were distributed there was a transfer of title and possession. The issue is whether the distribution was for a valuable consideration. The scant determinative facts before us are contained in the following stipulation: Between November 1, 1979 and October 31, 1982, Appellee gave samples of prescription flouride products and gels without charge to a number of Arkansas dentists. The State argues that there was a valuable consideration in the form of advertising. That argument asks us to reverse the trial court upon sheer speculation, and not upon the stipulated facts. The stipulation does not show the method of distribution; it does not show whether the sample contained any printing, printed materials, or whether any representations were made about them. Thus, if the samples were mailed to the dentists, no advertising was shown. If they were delivered by representatives, no representative advertising was shown. The stipulation offers no clue about the reason for the distribution. It does not reveal how particular dentists were selected as distributees or how many of them received an unknown quantity of samples. The stipulation does not tell us whether the dentists even know the name of the manufacturer or distributor of the samples. A valuable consideration in the form of advertising is simply not shown by the fact stipulation. The stipulation contains no evidence of consideration. Affirmed. Purtle, J., not participating. George Rose Smith, J., concurs.