How did a 1983 California memorandum apply the amended section 6020 to diagnostic, cosmetic, and animal images?

Plain-English summary

The July 18, 1983 memorandum answered an internal request about x-ray laboratory and veterinarian sales after section 6020 was amended effective October 1, 1982 by Senate Bill 1252, chapter 301, Statutes of 1982.

For x-rays and photographs produced to diagnose human medical or dental conditions and not used purely for cosmetic purposes, the producer was treated as the consumer of production materials and supplies. Tax applied to those inputs, while the producer's related sale of the qualifying image was not taxed as a retail sale. A producer dealing only in those qualifying images was not required to hold a seller's permit under the memorandum's historical rule.

Purely cosmetic images did not qualify. Their producers were retailers, the image sales were taxable, and a seller's permit was required. When an x-ray laboratory made one charge covering taxable and nontaxable property or services, it had to allocate the charge and tax only the nonexempt portion.

The memorandum gave three laboratory examples: exempt x-rays combined with taxable property; nontaxable services combined with taxable cosmetic x-rays; and taxable plus nontaxable x-rays for the same patient. It required proration in each, leaving exempt-image and nontaxable-service charges untaxed.

Section 6020 then specifically applied only to humans, so sales of animal-diagnostic x-rays were outside the provision. For a veterinarian's lump-sum charge, the memorandum required allocation between the described x-ray sale and unrelated professional services and treated the veterinarian as a retailer required to hold a seller's permit.

Later clarification and live annotation

The current live annotation preserves the amended-section, human-diagnosis, cosmetic-use and animal-x-ray distinctions. It additionally instructs producers to state taxable and nontaxable image prices separately and says the Board will allocate a lump sum from available information. This source requires allocation or proration but does not state either added instruction in those words.

The later February 8, 1984 memorandum expressly revisited this memorandum's veterinary paragraph. It said allocation was required where a veterinarian made a sale under section 6006, but no sale occurred when the veterinarian retained title and possession of films or made the rule-governed temporary veterinarian transfer described there. The 1983 source remains relevant to a film sale but is not the entire veterinary analysis.

The memorandum visibly prints deemed to bee a consumer. This page preserves the source typo rather than silently altering the original text. The June 16, 1983 request is absent. No patient, animal, laboratory, veterinarian, image, service, bill, allocation workpaper, material purchase, seller's permit, return, audit, assessment, refund or applied outcome is supplied.

CDTFA's Annotated Legal Opinions collection says these documents are summarized as annotations and statutory law controls over an inconsistent annotation. The official two-page PDF is native text with no raster image, so no OCR was required. Both fresh direct PDF downloads and both live-page downloads were byte-identical; duplicate default text extractions also matched.

What this means for you

Classify each image and service before allocating a mixed bill. The historical memorandum turned on human diagnosis, cosmetic purpose and whether property or a service was being sold. For veterinary work, first determine whether title or possession actually transferred; the later memorandum says allocation is unnecessary when no film sale occurred.

Common questions

Q: Who consumed materials for qualifying human diagnostic images?

A: The producer, under the post-October 1, 1982 version of section 6020 quoted in the memorandum.

Q: Were purely cosmetic images treated the same way?

A: No. Their producers were retailers, their sales were taxable, and the memorandum required seller's permits.

Q: How were mixed lump-sum laboratory charges handled?

A: They were allocated between taxable and nontaxable property or services, with tax applied only to the nonexempt sales portion.

Q: Was every veterinarian's x-ray charge automatically a film sale?

A: No. The later 1984 memorandum clarified that the allocation rule first required a sale; retained films and qualifying temporary transfers were not sales on its facts.

Missing evidence and references

• June 16, 1983 internal request — described but absent
• Patients, animals, laboratories and veterinarians — hypothetical or unidentified
• Images, services, bills and allocation workpapers — absent
• Material invoices, seller's permits and returns — implicated but absent
• Audits, assessments, refunds and applied outcomes — not supplied

Verbatim support

From the official July 18, 1983 internal memorandum:

Effective October 1, 1982, Section 6020 was amended (Senate Bill 1252, Chap. 301, Stats. 1982) to provide that “producers of x-ray films and photographs for the purpose of diagnosing medical or dental conditions of human beings, excluding use of those products for purely cosmetic purposes, are the consumers of materials and supplies used in the production thereof.”

When a retailer makes a lump-sum charge for taxable and nontaxable items, there must be an allocation or proration of the charges between the respective items; tax applying only to the sale of items not exempted.

Since Section 6020 of the Revenue and Taxation Code, as currently amended, specifically applies only to x-rays of human beings, the sale of x-ray films for the diagnosis of medical or dental conditions of animals is no longer exempt from the sales or use tax.

Under such circumstances, the veterinarian is considered to be a retailer of tangible personal property and is required to hold a seller’s permit.

Citations and references

• California Revenue and Taxation Code § 6020
• Senate Bill 1252, chapter 301, Statutes of 1982, as described in the source
• February 8, 1984 veterinary-film clarification supporting Annotation 420.0675

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0690
• Original supporting opinion: 420.0690 PDF
• Later veterinary clarification: February 8, 1984 memorandum

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. A. L. Hall

From:

Charles J. Graziano

Subject:

Application of Tax to Lump-Sum Billing by X-ray Laboratories

420.0690

Date:

July 18, 1983

Your memorandum of June 16, 1983 to Mr. Donald Hennessy has been referred to me for reply. You request our opinion as to the correct application of tax to the sale of x-rays by x-ray labs and by veterinarians. As a preliminary matter, we note that prior to October 1, 1982, Section 6020 of the revenue and Taxation Code provided that producers of x-ray films used for the purpose of diagnosis are consumers of materials and supplies used in their production. Effective October 1, 1982, Section 6020 was amended (Senate Bill 1252, Chap. 301, Stats. 1982) to provide that “producers of x-ray films and photographs for the purpose of diagnosing medical or dental conditions of human beings, excluding use of those products for purely cosmetic purposes, are the consumers of materials and supplies used in the production thereof.” Essentially, SB 1252 extended the former exemption from the sales tax for x-rays to the sale of photographs. It also clarified the purpose for which such photographs and x-ray films can be used, i.e., for diagnosing medical or dental conditions of human beings and not for purely cosmetic purposes. Therefore, as currently provided under Section 6020, tax applies to the sale of materials and supplies used in the production of x-rays and photographs which are used for medical or dental diagnosis of human beings and are not used for purely cosmetic purposes. Tax does not apply to the related sale by the producers of such x-rays or photographs to their customers, since the producer is deemed to bee a consumer and not a retailer of such items. Producers of such exempt x-rays and photographs who are considered to be consumers and not retailers are not required to hold a seller’s permit. The sale of x-rays or photographs which are used for purely cosmetic purposes is not exempt from tax. Accordingly, the producers of x-ray films and photographs used purely for cosmetic purposes are considered retailers of such items, and are required to hold a seller’s permit. You inquire as to the correct application of tax to the following situations:

1. An x-ray lab makes a lump-sum charge for the furnishing of either: a. x-rays which are not subject to tax and other items of tangible personal property which are taxable, or b. services which are not part of sale of tangible personal property and x-rays which are subject to tax (e.g., x-rays used for purely cosmetic purpose), or c. taxable and nontaxable x-rays which are performed on the same patient. As of October 1, 1982, the x-ray lab is considered to be a retailer of tangible personal property under all three situations described above. When a transaction involves a sale of tangible personal property, tax applies to the gross receipts from the furnishing of such property, unless the sale is otherwise exempt from tax. When a retailer makes a lump-sum charge for taxable and nontaxable items, there must be an allocation or proration of the charges between the respective items; tax applying only to the sale of items not exempted. Therefore, under the situations described above, tax does not apply either to the charges attributable to the exempt xray films (situation 1a and 1c) or to the charges attributable to the nontaxable services (situation 1b).

2. A veterinarian makes a lump-sum charge for professional services, which are not
   related to the sale of tangible personal property, and for x-rays. Since Section 6020 of the Revenue and Taxation Code, as currently amended, specifically applies only to x-rays of human beings, the sale of x-ray films for the diagnosis of medical or dental conditions of animals is no longer exempt from the sales or use tax. Therefore, a proration of the lump-sum charge must be made by the veterinarian between the charges for the sale of the x-rays and for the nontaxable services. Under such circumstances, the veterinarian is considered to be a retailer of tangible personal property and is required to hold a seller’s permit.

CJG:ba