Were cesium-137 and strontium-90 radiotherapy sources exempt medicines when hospitals used them for cancer treatment?

Plain-English summary

California treated miniaturized intracavitary cesium-137 sources for radiotherapy afterloading devices, a strontium-90 eye-therapy system, and cesium-137 tube sources as taxable devices or physical equipment rather than medicine.

The letter reasoned that the long-lived radiation sources were not consumed in treatment like substances and preparations ordinarily regarded as medicine. It compared them to taxable X-ray equipment and medical sunlamps and said intracavitary use did not change the result.

Common questions

Did hospital use for cancer treatment make the sources medicine?

No.

Did placing a source inside a body cavity make it exempt?

No. The opinion said intracavitary use was immaterial to the classification.

What products were addressed?

Cesium-137 afterloading and tube sources and a strontium-90 eye-therapy system.

Citations and references

• Historical California Sales and Use Tax Regulation 1591 — medicine definition and equipment exclusion applied 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/425-0765.pdf

Original ruling text

425.0765

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-2641

September 2, 1977

Mr. T--- S--Manager
N--- A--- Inc.
XXX --- ----- ---, NY XXXXX
Dear Mr. S---:
This is in response to your letter of July 29, 1977. You have raised a question with respect to the proper application of the California sales tax. We understand that N--- A---, Inc., whose business location is in the State of New York is a supplier of radioactive sources and accessories used in cancer treatment. Your radioactive source manufacturer is I--- P--- L--- of ---, California. In a recent audit by the State Board of Equalization, IPL was assessed sales tax for shipments covering products sold to you but shipped to users in California during the period December 1975 through October 1976. Your arrangement with I--- P--- L--- is that you give them shipping instructions and it ships to your customers and bills you for materials involved. You in turn bill the user (your customer) which is generally a hospital. You have regarded the radioactive items as nontaxable because you consider the materials to be “medicines. As you are aware, our Regulation 1591, “Prescription Medicines,” provides that tax does not apply to sales of medicines for the treatment of a human being, which medicines are sold to a hospital for the treatment of a human being. “Medicines” is defined to include any substance or preparation for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment, or prevention of disease, which is commonly recognized as a substance or preparation intended for such use. Specifically excluded from the term “medicines” are articles which are in the nature of instruments, apparatuses, contrivances, devices or mechanical of physical equipment.

Mr. T--- S---

-2-

September 2, 1977
425.0765

The particular products in question are your miniaturized intracavitary cesium-137 sources for radiotherapy afterloading devices, your eye therapy system which uses strontium-90, and your cesium-137 tube sources. We are of the opinion that the items in question do not constitute “medicines” but are devices or physical equipment and are taxable as such. Cesium-137 has a 30 year half-life and strontium-90 has a 28 year half-life. These radiation sources clearly are not consumed in the treatment of disease in the manner in which substances and preparations typically regarded as medicines are so consumed. We have always taken the position that tax applies to sales of X-ray equipment even though the X-ray equipment is the source of radiation for treatment or diagnosis of human ills. Likewise tax applies to sales of sunlamps used for medical purposes. We think it immaterial that the radiotherapy sources in question may be used intracavitarily. Very truly yours,

Gary J. Jugum
Tax Counsel

j:alicetilton