Were home-use pulsed colon-irrigation systems exempt prescription medicines?

Plain-English summary

A seller described its Pulse Irrigation Evacuation system as pulsing warm water into the colon through a cuffed speculum at three pounds per square inch. The water hydrated stool and stimulated natural peristalsis; waste flowed by gravity into a containment bag without suction. The seller marketed the system to home-bound patients for continuing therapy at home.

Senior Tax Counsel said items like this system applied treatment by injecting liquid to stimulate the body's natural elimination system, but were neither implanted nor worn and were not necessary because of a surgically created opening for waste elimination. The system therefore did not qualify as medicine and remained excluded equipment under Regulation 1591(c)(2).

The seller reported that it sold directly to patients, was licensed as a durable-medical-equipment provider, and was not a pharmacist. The letter treated the lack of pharmacist status under Regulation 1591(d)(1) as an additional reason the sales were taxable.

Live annotation and source posture

The current live annotation closely preserves the system description, application-of-treatment reasoning, absence of implantation, wear and a surgically created opening, and the taxable-sales conclusion. It also displays the reference (2003–3), which does not appear in the supporting letter.

The live page omits the letter's separate dispensing ground: direct patient sales by a licensed durable-medical-equipment provider that was not a pharmacist. It also omits that the source relies on Annotation 425.0522 dated March 3, 1995 without reproducing that prior staff opinion.

The source supplies no patient, prescription, physician, product model, specifications beyond the short functional description, instructions, invoice, sales amount, tax payment, return, audit, assessment, refund or final transaction record. It therefore does not show how any later or differently designed system would be classified.

Several defects are visible in the native-text official PDF and remain verbatim below. It calls the product PIE and then PUIE; the quoted request says material is not suctioned out if the patient; it prints Title 28 before Regulation 1591; and its Market Street Railway cite gives 1953 and 290 PO.2d 201.

The printed 137 Cal.App.2d 87 reporter resolves to Market Street Railway Co. v. California State Board of Equalization, filed in 1955 with the parallel citation 290 P.2d 20. The printed Standard Oil reporter and parallel citation resolve to the named 1974 case.

The official three-page PDF has a native text layer. Its one small page-one image is letterhead artwork rather than scanned body text, so no OCR was required. Two fresh direct PDF downloads and two live-page downloads were byte-identical; duplicate default text extractions also matched.

CDTFA's Annotated Legal Opinions collection says these documents are summarized as annotations and statutory law controls over an inconsistent annotation.

What this means for you

Document both the device and the dispensing path. Retain product specifications, diagrams, instructions, evidence of whether anything is implanted or worn, surgical history supporting any claimed waste-opening category, prescriptions, seller and pharmacist licenses, invoices and patient-delivery records.

A therapeutic purpose or medical-equipment license did not by itself establish the medicine exemption in this letter. The equipment classification and the seller's dispensing status each mattered.

Common questions

Q: Did therapeutic use make the system medicine?

A: No. The letter characterized it as equipment that applied treatment rather than medicine.

Q: Was it an exempt implanted, prosthetic, orthotic or waste-opening device?

A: No on the supplied facts. It was neither implanted nor worn and was not necessary because of a surgically created opening.

Q: Were the seller's direct patient sales taxable?

A: Yes. Product classification was one ground, and the nonpharmacist seller's status was another.

Q: Did the source include the earlier staff opinion it relied on?

A: No. It names Annotation 425.0522 and its date but does not reproduce that opinion or its facts.

Q: Did the letter decide tax for every colon-irrigation system?

A: No. It applied the rules to the described system and sales route; detailed specifications and transaction records are absent.

Missing evidence and references

• May 6, 2002 request and attachments — absent
• Complete seller identity, license records and permit details — redacted or absent
• Product model, specifications, diagrams, instructions and testing — absent
• Patients, prescriptions, physicians and surgical records — absent
• Invoices, sale dates, prices, delivery records, returns and tax payments — absent
• Audits, assessments, refunds, appeals and final outcomes — not supplied
• Annotation 425.0522 supporting opinion — cited but not reproduced

Verbatim support

From the official October 24, 2002 Senior Tax Counsel letter:

“The PIE is a closed system that pulses warm water into the colon through a cuffed speculum, hydrating stool and allowing it to evacuate by gravity to a containment bag. The gentle pulsing water stimulates the natural peristaltic action of the colon. Inflow and outflow is controlled and adapted to each patient and application. Inflow is under low pressure, 3 psi. Outflow is to gravity only.

We have previously concluded that items like the PIE, which inject liquid to stimulate the body’s natural elimination system, apply treatment to the patient.

They are neither implanted in nor worn on the body nor are they made necessary as a result of a surgical procedure by which an artificial opening is created to eliminate natural waste. For these reasons, they do not qualify as medicines under Regulation 1591.

You are not, however, a pharmacist, as required under Regulation 1591(d)(1). As a result, your sales are subject to tax on this additional basis.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6091 — sales-tax and burden rules discussed in the letter
• California Revenue and Taxation Code § 6369 and California Sales and Use Tax Regulation 1591(a), (b)(1), (b)(2), (b)(4), (b)(5), (c)(2), and (d)(1) — medicine, device and dispensing rules
• California Sales and Use Tax Regulation 1591.1(b)(2) — appliances necessary because of a surgically created waste opening
• Market Street Railway Co. v. California State Board of Equalization, 137 Cal. App. 2d 87, 96 (1955) — reporter resolves, but the letter prints the wrong year and parallel citation
• Standard Oil Co. v. State Board of Equalization, 39 Cal. App. 3d 765, 769 (1974) — reporter and parallel citation resolve to the named case
• Annotation 425.0522 (3/3/95) — cited as a prior staff position but not reproduced

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 425.0022.800
• Original supporting opinion: 425.0022.800 PDF

Original ruling text

425.0022.800

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-00XX
TELEPHONE (916) 324-3828
FAX (916) 323-3387

DEAN ANDAL
Second District, Stockton

www.boe.ca.gov

CLAUDE PARRISH
Third District, Torrance
JOHN CHIANG
Fourth District, Los Angeles
KATHLEEN CONNELL
State Controller, Sacramento

October 24, 2002

JAMES E. SPEED
Executive Director

Ms. S--- H--N--- C--- H--- Center
XXXX --- Lane
---, California XXXXX
Re:

Pulsed Irrigation Evacuation
SR -- XX-XXXXXX

Dear Ms. H---:
I am answering your letter dated May 6, 2002, to me regarding your sales of the Pulse Irrigation Evacuation (PIE) colon irrigation system. I apologize for the delay in answering. You describe the PUIE system as follows: “The PIE is a closed system that pulses warm water into the colon through a cuffed speculum, hydrating stool and allowing it to evacuate by gravity to a containment bag. The gentle pulsing water stimulates the natural peristaltic action of the colon. Inflow and outflow is controlled and adapted to each patient and application. Inflow is under low pressure, 3 psi. Outflow is to gravity only. At no time is material suctioned out if the patient.” You are marketing this system to home-bound patients for on-going therapy in their own homes. OPINION A.

Sales and Use Tax Generally.

In California, except where specifically exempted by statute, Revenue and Taxation Code Section 6051 imposes a sales tax, computed as a percentage of gross receipts, upon all retailers for the privilege of selling tangible personal property at retail in this state. (Unless otherwise stated, all statutory references are to the Revenue and Taxation Code.) “[I]t shall be 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.

Ms. S--- H---

-2-

October 24, 2002
425.0022.800

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. Certain items, which might otherwise be considered as being devices, etc., are defined as “medicines.” Regulation 1591(b)(2) includes items permanently implanted in the human body for the purpose of assisting, as opposed to replacing, the functioning of any natural organ, artery, vein, or limb, and which remains or dissolves 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 1591.1(b)(2) 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. C.

Tax Consequences to N--- C--- H---.

We have previously concluded that items like the PIE, which inject liquid to stimulate the body’s natural elimination system, apply treatment to the patient. They are neither implanted in nor worn on the body nor are they made necessary as a result of a surgical procedure by which an artificial opening is created to eliminate natural waste. For these reasons, they do not qualify as medicines under Regulation 1591. (See, e.g., Annot. 425.0522 (3/3/95). Sales and Use Tax Annotations are excerpts from previous Board Staff opinion letters and serve as guides to Staff positions.) As a result, they are excluded from the term “medicines” under subdivision (c)(2).

Ms. S--- H---

-3-

October 24, 2002
425.0022.800

In your letter, you indicate that you sell your products directly to patients for use in their own homes. You also indicate that you are a licensed durable medical equipment provider. You are not, however, a pharmacist, as required under Regulation 1591(d)(1). As a result, your sales are subject to tax on this additional basis. 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
Senior Tax Counsel

JLW/ef
cc:

--- --- District Administrator (--)