Were sales of permanently implanted Biogran bone-graft material taxable?

Plain-English summary

Biogran was a resorbable synthetic bioactive-glass graft used to repair oral bone defects. California agreed that its sales were not subject to tax because it stimulated bone growth, a natural bodily function, and was permanently implanted in the patient.

Common questions

Why did the permanent implant qualify?

The opinion treated stimulation of bone growth as assisting a natural bodily function and relied on the product's permanent implantation.

Did the opinion address every dental graft material?

No. It addressed Biogran with the characteristics described in the memorandum.

Citations and references

• 18 Cal. Code Regs. § 1591(b)(2) — qualifying articles permanently implanted to assist a natural bodily function
• Annotation 425.0473 (February 13, 1991) — cited for the position that bone-growth stimulation is a natural bodily function

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/425-0211-750.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Ms. Karen Hughes
Associate Tax Auditor
Audit Evaluation and
Planning Section – MIC:40

From:

John L. Waid

Subject:

X-----------------------------

425.0211.750

Date:

February 25, 1997

I am responding to your memorandum dated January 7, 1997, to Assistant Chief Counsel Gary J. Jugum regarding the application of tax to X-------------’s sales of a product called “Biogran.” You attached to your memorandum a copy of a brochure which X-------------------faxed to you on December 16, 1996. You describe the product as follows: "Biogran is a resorbable synthetic graft for use in repair of bony defects. It is a bioactive glass of narrow size range which has been shown to accelerate the healing of bone tissue in oral defects.
[¶¶] As 'Biogran' is permanently implanted in patients by dentists, it appears that 'Biogran' may be exempt from tax .... " Regulation 1591(b) (2) discusses the application of tax to sales of implants as follows: "Bone screws, bone pins, pacemakers, and other articles permanently implanted in the human body to assist the functioning of, as distinguished from replacing all or any part of, any natural organ, artery, vein or limb and which remain or dissolve in the body .... " We have previously determined that stimulation of bone growth is a natural function of a part of the body. (See, e.g. Annot 425.0473 (2/13/91.) You also indicated that these items are permanently implanted. Therefore, we agree that sales of Biogran are not subject to tax. JLW:sr