Could a California county buy the Norplant contraceptive implant tax-free for distribution through its health clinic?

Plain-English summary

California treated the described Norplant System as medicine. It was surgically implanted just under the skin of a woman's arm, released hormones similar to oral contraceptives, and could remain in place for up to five years. Staff compared it with hormone- or chemical-releasing intrauterine devices that it had already treated as medicines.

The county could therefore buy Norplant tax-free for distribution by its county health clinic to treat human beings. To make that purchase without tax, the county had to give its suppliers exemption certificates meeting Regulation 1667.

Common questions

Was implantation alone the stated reason for the result?

No. The opinion emphasized that the implanted system released hormones and operated similarly to qualifying intrauterine devices.

Did the county need purchase documentation?

Yes. The letter required conforming exemption certificates at the time of purchase.

Citations and references

• California Sales and Use Tax Regulation 1591(a)(5) — county health-clinic purchase for distribution in human treatment
• California Sales and Use Tax Regulation 1591(p)(3) and Regulation 1667 — exemption-certificate requirements identified 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/425-1120.pdf

Original ruling text

425.1120

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM K. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

August 14, 1992

BURTON W. OLIVER
Executive Director

Re: X-------------------------Dear X---------------------:
I am answering your follow-up letter of July 23, 1992 to my letter to you of July 10, 1992 regarding the sales tax status of contraceptives issued by the county health clinic. You supplied further information on the above product. OPINION I discussed in my previous letter to you the rules governing the exemption from sales and use tax for sales of prescription medicines, so, for the sake of brevity, I will not repeat it here. You describe the Norplant System as follows: "The Norplant System is surgically implanted in a woman's arm just under the skin and releases hormones similar to those in oral contraceptives. It can remain in place up to five years." This item appears to operate in much the same way as do intrauterine devices that releases chemicals or hormones except that it is implanted in the arm instead of the uterus itself. As I noted in my letter, we have previously determined that those devices qualify as medicines. Consequently, we conclude that the Norplant System also so qualifies. Thus, the county may purchase it free of tax for the purpose of distribution by the county health clinic for the treatment of a human being. (Regulation 1591(a) (5).) In order to purchase free of tax this item and those discussed in my previous letter as being exempt, X-------------------- must issue its suppliers exemption certificates at tne time of purchase. These certificates must conform to the requirements of Regulation 1667. (Reg. 1591(p) (3).)

For your information, I have enclosed a copy of Regulation 1667. 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
Enclosure:
Bc:

Reg. 1667

Ventura District Administrator

BOE-1137 REV. 11 (7-02)