Did a 1994 California letter exempt disposable catheters used for diagnosis, vascular access, monitoring, administration, and pain management?

Plain-English summary

The manufacturer described clinically advanced disposable catheters and related products used for central vascular access, administration of fluids, drugs and blood products, patient monitoring, diagnosis, interventional procedures, and pain management. It attached a sample product list, a prior annotation, a hospital letter, and Tax Tip Pamphlet No. 45; none appears in the official PDF.

The letter applied section 6369 and historical Regulation 1591. It said devices ordinarily were excluded from medicine, while specified implant, orthotic, prosthetic and post-surgical drainage provisions created narrow exceptions. The manufacturer’s described uses did not fit those exceptions. Assuming the catheters were not permanently implanted, the sales were taxable.

The opinion identified three catheter categories that could qualify: permanent implants; post-surgical drainage through an artificial opening created to eliminate natural waste; and qualifying post-surgical drainage through a natural opening. It rejected a hospital letter's broader statement that any catheter used as a result of an artificial opening was exempt.

Because the product list was too voluminous, Tax Counsel expressly declined a definitive opinion on each item. The conclusion is general and conditional, not a classification of every product the manufacturer sold.

Live annotation and source posture

The current live annotation accurately preserves the described taxable uses and permanent-implant caveat. It identifies the rule as Regulation 1591.1(b)(4) and marks the text Am. 2003–2. The supporting letter instead uses the 1994 Regulation 1591 structure and does not contain that later citation or amendment marker.

The live page omits the artificial- and natural-opening drainage exceptions, post-surgical condition, voluminous-list limitation, hospital-letter correction, taxable-sales presumption, prior annotation, pamphlet, and the assumption that none of the described products was permanently implanted.

The source visibly says section 6369 was implemented by Title 28, California Code of Regulations, Regulation 1591; the regulation is otherwise described throughout as a Sales and Use Tax Regulation, and no source correction is supplied. It also prints Market St. Ry. as a 1953 case at 137 Cal.App.2d 87 [290 PO.2d 201.). Independent legal research found that the reporter resolves to the named case decided in 1955, and 39 Cal. App. 3d 765 resolves to the named Standard Oil case. The malformed year and parallel cite remain unchanged below.

The February 22, 1994 inquiry, product list, December 31, 1993 fax, February 25, 1991 hospital letter, Pamphlet No. 45, product specifications, implantation facts, drainage facts, invoices, sales, returns, audit, assessment, refund and applied outcome are absent.

CDTFA's Annotated Legal Opinions collection says these documents are summarized as annotations and statutory law controls over an inconsistent annotation. The three-page PDF has native text and one page-one letterhead stencil, so no OCR was required. Two fresh direct PDF downloads and two live-page downloads were byte-identical; duplicate default text extractions also matched.

What this means for you

Do not treat catheter as one tax category. Document the device's exact function, whether it remains implanted, whether drainage follows surgery, whether the opening is artificial or natural, and whether an artificial opening eliminates natural waste. A hospital's general exemption statement was insufficient here.

Common questions

Q: Were catheters exempt merely because physicians used them in critical care?

A: No. Actual function and the specific regulatory exception controlled.

Q: Did the opinion decide every product on the manufacturer's list?

A: No. It expressly gave only a general catheter analysis.

Q: What assumption supported the taxable conclusion?

A: That none of the described catheters was permanently implanted.

Q: Was every catheter associated with an artificial opening exempt?

A: No. The letter required the narrower Regulation 1591(j) conditions, including elimination of natural waste, and described the hospital's broader advice as incorrect.

Missing evidence and references

• February 22, 1994 inquiry and sample product list — described but absent
• Annotation fax, February 25, 1991 hospital letter and Tax Tip Pamphlet No. 45 — described but absent
• Product specifications, labels and implantation or drainage facts — absent
• Patients, prescribers, prescriptions and hospital use records — absent
• Sales, invoices, returns, audits, assessments, refunds and outcomes — not supplied

Verbatim support

From the official April 13, 1994 Tax Counsel letter:

As a rule, then, items used to diagnose a condition or to apply medicine or treatment to the patient are not considered to be medicines.

Therefore, all catheters are taxable with three exceptions: (1) catheters which are permanently implanted are exempt under Regulation 1591(b)(2); (2) catheters which are used for drainage purposes through artificial openings are exempt under Regulation 1591(j); and (3) catheters or other types of drainage devices used for drainage through natural openings are exempt under sub-division (b)(5).

The list of products which you sent is too voluminous for me to give a definitive opinion on each one.

Assuming none of these catheters are permanently implanted, their sales are subject to tax.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6091 — general taxable-sales rule and presumption
• California Revenue and Taxation Code § 6369 and Sales and Use Tax Regulation 1591 — prescription-medicine framework
• California Sales and Use Tax Regulation 1591(b)(2) — permanently implanted articles
• California Sales and Use Tax Regulation 1591(b)(5) and (j) — qualifying natural- and artificial-opening drainage uses discussed in the opinion
• California Sales and Use Tax Regulation 1591(c)(2) — appliances and devices excluded from medicine
• Annotation 425.0230 — prior catheter guidance applied by the opinion
• Market Street Railway Co. v. State Board of Equalization, 137 Cal. App. 2d 87 — source prints the wrong year and malformed parallel cite
• Standard Oil Co. v. State Board of Equalization, 39 Cal. App. 3d 765 — reporter resolves to the named case

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 425.0011
• Original supporting opinion: 425.0011 PDF

Original ruling text

425.0011

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

April 13, 1994

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

Ms. T--- A. C--Accountant
A--- I---, Inc.
P.O. Box XXXXX
XXXX --- Road
---, --- XXXXX

BURTON W. OLIVER
Executive Director

Re: SR – XX-XXXXXX
Catheters
Dear Ms. C---:
I am responding to your letter of February 22, 1994 to the Legal division requesting an opinion with regard to the application of sales and use tax to sales by your company ("A---"). You describe A---'s operations as follows: "A--- develops, manufactures and markets a great range of clinically advanced, disposable catheters and related products. The Company's products are used primarily in critical care procedures by anesthesiologists, critical care specialists, surgeons, cardiologists and emergency and trauma physicians. The critical care products are used principally for central vascular access for administration of fluids, drugs, and blood products, patient monitoring and diagnostic purposes, as well as for pain management. A--- also produces a line of vascular interventional procedure products used by cardiologists and interventional radiologists for such purposes and the diagnosis of heart and vascular disease." You attached copies of a sample list of A---'s products and their content, a copy of Annotation 425.0230 faxed to you on December 31, 1993, by Ms. Carol Jaffe of the Board's San Francisco District office; a copy of a letter to a Mr. J--- R---, presumably of your company, from Ms. P--- L. C---, dated February 25, 1991, Chief Accountant of P--- V--- Hospital, in which she states that the products her hospital purchases are exempt from tax by reason of Revenue and Taxation Code Section 6369 "which states that catheter used as a result of an artificial opening created in the human body shall be deemed to be dispensed upon prescription" (unless otherwise stated, all statutory references are to the Revenue and Taxation Code); and a copy of Tax Tip

Ms. T--- A. C---

-2-

April 13, 1994
425.0011

Pamphlet No. 45 which you apparently received from The H--- Group, representing The C--H--- of the M--- P---. OPINION A. Sales and Use Tax Generally. In California, except where specifically exempted by statute, Section 6051 imposes an excise tax, computed as a percentage of gross receipts, upon all retailers for the privilege of selling tangible personal property at retail in this state. "[I]t shall the presumed that all gross receipts are subject to tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale ..." (§ 6091.) "Exemptions from taxation must be found in the statute." Market St. Ry. Co. v. Cal. St. Bd. of Equal. (1953) 137 Cal.App.2d 87, 96 [290 PO.2d 201.) The taxpayer has the burden of showing that he clearly comes within the exemption. Standard Oil Co. v. St. Bd. of Equalization (1974) 39 Cal.App.3d 765, 769 [114 Cal.Rptr. 571].) B. Prescription Medicines. Section 6369, interpreted and implemented by Title 28, California Code of Regulations, Regulation 1591, provides that sales of medicine, when prescribed and sold or furnished under certain conditions for the treatment of a human being, are exempt from sales or use tax. (Reg. 1591(a).) Subdivision(b)(1) defines "medicine" to "mean and include any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment, or prevention of disease and which is commonly recognized as a substance or preparation intended for such use." However, Regulation 1591(c)(2) adds that "medicines" do not include "articles which are in the nature of splints, bandages, pads, compresses, supports, dressings, instruments, apparatus, contrivances, appliances, devices, or other mechanical, electronic, optical or physical equipment or article or the component parts and accessories thereof." (Sales and Use Tax Regulations are Board promulgations which have the force and effect of law.) As a rule, then, items used to diagnose a condition or to apply medicine or treatment to the patient are not considered to be medicines. Regulation 1591(b) does provide that certain items which might otherwise be considered as being devices, etc., are defined as "medicines." Sub-division (b)(2) included articles permanently implanted in the human body to assist the functioning of any natural organ, artery, vein or limb and which remain or dissolve in the body. Regulation 1591(b)(4) includes orthotic devices, or their replacements, designed to be worn on the person of the user as a brace, support, or other correction for the body structure. Regulation 1591(b)(5) includes prosthetic devices and their replacement parts designed to be worn on or in the person of the user to replace or assist in the functioning of a natural part of the human body. Regulation 1591(j) includes any appliances and related supplies necessary as a result of any surgical procedure by which an artificial opening is created in the human body for the elimination of natural waste.

Ms. T--- A. C---

-3-

April 13, 1994
425.0011

Therefore, all catheters are taxable with three exceptions: (1) catheters which are permanently implanted are exempt under Regulation 1591(b)(2); (2) catheters which are used for drainage purposes through artificial openings are exempt under Regulation 1591(j); and (3) catheters or other types of drainage devices used for drainage through natural openings are exempt under sub-division (b)(5). To be exempt, their use must be post-surgery. Sales of catheters used for diagnostic purposes, irrigation, feeding, and administration are subject to tax. (Annot. 425.0230.) C. Tax Consequences to A---. First of all, the letter from P--- V--- Hospital contains incorrect advice. Only catheters used for elimination of natural waste as a result of an artificial opening in the body are deemed to be dispensed on prescription under Regulation 1591(j), not just any catheter so used. The list of products which you sent is too voluminous for me to give a definitive opinion on each one. I can, however, discuss the application of tax to sales of catheters generally. The statement of law found in Annotation 425.0230 is correct. For their sales to be exempt from tax, catheters must be used in one of the three ways set forth in the annotation. Otherwise, they are excluded from the term "medicines" per Regulation 1591(c)(2). You describe A---'s products as being used primarily for diagnostic purposes, and for administration of fluids, drugs and blood products, and for patient monitoring, as well as for pain management. Such uses do not come within the exemptions outlined in the annotation. A---'s products are thus appliances or devices excluded from the terms "medicines" under Regulation 1591(c)(2). Assuming none of these catheters are permanently implanted, their sales are subject to tax. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel
JLW:es
cc: Ms. Carol Jaffe, San Francisco District
A---.ltr