Are external fixators and single-use surgical wire exempt from Colorado tax as therapeutic devices?

Plain-English summary

A company that sells prosthetic, orthopedic, and orthotic devices to hospitals, surgical centers, and veterinarians asked whether two products are exempt therapeutic devices: its external fixators and a surgical wire.

• External fixators are devices of various shapes/sizes that support fractured arms and legs — pins screwed into the bone attached to an adjustable external rod or tube, correcting the deformity and supporting the bone during healing (used mainly for open fractures, staying on from days up to the full healing period; a prescription is in the patient's operative notes).
• The surgical wire is used for small fractures, implanted temporarily, and protrudes through the skin so it can be extracted later.

The exemption. Colorado exempts therapeutic devices, equipment, and related accessories used to correct or treat a human physical disability or surgically-created abnormality (§ 39-26-717).

1. External fixators qualify — they're an appliance (reusable equipment). A fixator is an appliance used to treat or correct a physical disability, so it's an exempt therapeutic device. But the exemption applies only when sold to treat humans — sales to veterinarians (for animals) are not covered.

2. The surgical wire does not qualify — it's a single-use supply. To be an exempt therapeutic device, an item must be a piece of equipment or a mechanism — an "appliance" implies a degree of permanence and capability of repeated use, as opposed to a supply item used once and discarded. The Department noted that even support hose, heel protectors, and boot cradles are therapeutic items but don't qualify because they aren't equipment. The wire appears to be a simple wire, discarded after use, lacking permanence and repeated-use capability — so it's taxable.

What this means for you

Medical-device and orthopedic suppliers

For the therapeutic-device branch of Colorado's medical exemption, the dividing line is reusable equipment vs. single-use supply. A durable, adjustable, reusable device (external fixator, frame, brace mechanism) reads as an exempt appliance; a disposable item consumed in one procedure (a plain wire, a pin used once) reads as a taxable supply, even if it's medically essential.

Human use only

This therapeutic-device exemption is for treating humans. The same fixator sold to a veterinarian for animal use is not exempt. Track the buyer/use, not just the product.

Two different medical-exemption tests

Colorado's § 39-26-717 has more than one path. This letter applies the therapeutic-device test (is it reusable equipment?). A separate path exempts drugs and materials a doctor furnishes that leave with the patient — a different question (see the related letters). An item can fail one test and pass the other, so identify which branch you're under.

Common questions

Q: Are external fixators taxable in Colorado?
A: No — an adjustable external fixator is an exempt therapeutic device (a reusable appliance that treats a physical disability), when sold to treat humans.

Q: Why is the surgical wire taxable but the fixator isn't?
A: The exemption requires equipment with permanence and repeated-use capability. The fixator is reusable equipment; a single-use wire that's discarded after the procedure is a taxable supply, not equipment.

Q: Does it matter that I also sell to veterinarians?
A: Yes. The therapeutic-device exemption applies only to items sold to treat humans. Sales for animal use aren't exempt.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance, not binding on the Department.

Citations and references

Statutes and publications:
- § 39-26-717, C.R.S. — exemption for therapeutic devices, equipment, and accessories that correct/treat a human physical disability
- Department publication FYI Sales 68 — Medical and Dental Equipment and Supplies

Related Colorado medical-exemption letters:
- [[gil-08-035-medical-supplies-and-equipment]] — wheelchairs/hospital beds exempt; therapeutic devices over $100 need a doctor's written recommendation
- [[gil-08-014-taxability-of-medical-equipment]] — the "leaves with the patient" test for doctor-furnished materials (a different branch of § 717)
- [[gil-08-026-sales-tax-exemption]] — orthopedic implants exempt via doctor-furnished materials
- [[gil-08-013-taxability-of-name-products]] — visco-elastic mattresses/pillows held NOT exempt therapeutic devices
- [[gil-08-021-sales-tax-re-supplements-etc]] — TENS units exempt only if designed to treat a disability

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-07-025.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-2007-25

XXXXXXXXXXXXX
Attn: XXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
December 4, 2007

Re; Taxability of External Fixator and [name] Wire
Dear XXXXXXX,
This letter is in response to your letters to the Colorado Department of Revenue, dated May 31 and June 15,
2007, re: taxability of External Fixators and [name] Wire. We apologize for the time it has taken to respond to
your inquiry.
Issue
1. Is your external fixator products and [name] wire non-taxable therapeutic devices?
Background
Your company sells medical prosthetic, orthopedic, orthotic devices and medical instruments primarily to
hospital, surgical centers and veterinarians. Your company offers a line of products generally described as
external fixators. These products are devices that come in several different shapes and sizes in order to allow
for the supporting of fractured arms and legs. The fixator is composed of pins screwed into the bone, and are
attached to an external rod or tube that can be adjusted to various angles. The external fixators correct the
deformity created by fractures and support bone during healing. They are used primarily for open fractures.
The amount of time that this implant would remain attached to the body is from a couple of days to the entire
period for which the injury takes to heal. You represent that a prescription for the product is part of the
operative notes in the patient’s file.
[name] Wire is used for small fractures and are implanted into a patient on a temporary basis. The wire
protrudes through the skin to allow it to be extracted.
Discussion
1. External fixators qualify as non-taxable therapeutic devices.
Colorado exempts from sales and use tax therapeutic devices, equipment and related accessories which are
used to correct or treat a human physical disability or surgically-created abnormality. §39-26-717, C.R.S.
The external External Fixator products qualify as therapeutic devices because they are an appliance that is
used to treat or correct a human physical disability. I note that you state that you sell your products to
veterinarians. The exemption, however, applies only when the appliance is sold to treat humans.

2. [name] wires are not non-taxable therapeutic devices.
[name] Wires do not qualify for the therapeutic appliance exemption. An “appliance” is defined as a piece of
equipment for adapting a tool or machine to a special purpose. In order to qualify for the exemption as a
therapeutic device, an item must be a piece of equipment or a mechanism. This term suggests a degree of
permanence, with the capability of repeated use, as opposed to a supply item that may be used once and then
discarded.” For example, a support hose, heel protector, boot cradles are therapeutic items, but do not qualify
because they are not equipment. See, Department publication FYI Sales 68. The [name] Wire appears to be
a simple wire. I assume it is discarded after use. The wire is not an appliance because it is not equipment and
it does not have permanence and the capability of repeated use.
Finally, the Department makes a good faith effort to provide accurate and complete answers to questions posed
to it by taxpayers. However, the information and answers provided here are not binding on the Colorado
Department of Revenue, nor do they replace, alter, or supersede Colorado law and regulations. The Executive
Director, who by statute is the only person having authority to bind the Department, has not formally reviewed
and/or approved this response.
Respectfully,

Office of Tax Policy
Colorado Department of Revenue