Did an autotransfusion system qualify as exempt medicine because it handled the patient's blood?

Plain-English summary

California treated autotransfusion systems as taxable medical devices. The systems returned the patient's own blood to the body rather than draining natural waste, so they did not fit the historical drainage-based medicine exemption.

The same letter found the seller's sample exemption certificate acceptable under Regulation 1667. That documentation rule could relieve a seller that timely accepted a purchaser's written certification for property actually intended for an exempt use, but it did not make the autotransfusion system itself exempt on the stated facts.

Common questions

Did handling blood make the system a drainage device?

No. The decisive function was reinfusion, not removal of waste from the body.

Did an exemption certificate automatically exempt the system?

No. A certificate addressed seller documentation for qualifying uses; the opinion still classified autotransfusion systems as taxable.

Citations and references

• California Sales and Use Tax Regulation 1667 — exemption-certificate rule discussed in the letter

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/425-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/425-0179.pdf

Original ruling text

425.0179

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-5589

March 6, 1989
Ms. J--- R--Controllers Office
S--- H--- S----- --- Plaza
P. O. Box XXX
---, Pennsylvania XXXXX
Re:

S--- H--- S--#SY -- XX-XXXXXX

Dear Ms. R---:
Your letter of January 18, 1989 has been referred to the undersigned for reply. You have requested our advice regarding the following: 1.

Whether the sample “Tax Exemption Certificate” you enclosed with your letter is acceptable in determining the taxable status of an item.

2.

Whether autotransfusion systems are exempt medicines.

The sample “Tax Exemption Certificate” is an acceptable exemption certificate as provided in Sales and Use Tax regulation 1667 (copy enclosed). As noted in regulation 1667(b)(1), “…a seller is relieved of the liability for sales tax if the purchaser timely certifies in writing to the seller that the property (purchased) will be used in a manner or for a purpose entitling the seller to regard the gross receipts from the sale to be exempted from sales tax…”. Autotransfusion systems do not qualify as exempt medicines. Such devices are used to reinfuse the patient’s own blood rather than to provide drainage of waste products from the body. As such, the sale of such units are subject to tax. If you have further questions concerning this matter, please write this office again. Very truly yours, Mary C. Armstrong Tax Counsel MCA/smt Enclosure:

Regulation 1667