When are medical supplies and equipment exempt from Colorado sales and use tax?

Plain-English summary

Colorado’s Department of Revenue gave general guidance on several medical products, including catheters, bandages, syringes, pumps, and compression stockings. It said medical supplies furnished by a doctor as part of professional services are exempt, and that supplies leaving the doctor’s office with the patient are generally treated as exempt medical supplies. The letter gives bandages, catheters, and dressings as examples.

The distinction is where and how the item is used. A supply used to treat a patient but kept at the doctor’s office, such as X-ray equipment, is not exempt under the medical-supply treatment described in the letter. The letter also says purchases by certain charitable entities, generally entities holding an IRS 501(c)(3) certificate, can qualify for a separate exemption.

What this means for you

Medical providers and suppliers

A product that leaves the doctor’s office with the patient may fit the Department’s general medical-supply treatment. The letter does not make every medical product exempt; the professional-services and patient-use facts matter.

Hospitals and charitable entities

A qualifying charitable entity may have an exemption for purchases of certain medical supplies even where the purchase would otherwise be taxable to a physician. The letter gives a hospital with an IRS 501(c)(3) certificate as an example.

Accountants and tax professionals

The letter points readers to FYI Sales 68 for a longer list of qualifying supplies. It gives general guidance rather than a binding determination for a particular transaction.

Common questions

Q: Are all medical products exempt?
A: No. The letter describes exemptions for medical supplies furnished by a doctor as part of professional services and supplies that leave the doctor’s office with the patient. It says equipment used in treatment but kept at the office, such as X-ray equipment, is not exempt under that treatment.

Q: Can a hospital claim an exemption?
A: A qualifying charitable entity, generally one holding an IRS 501(c)(3) certificate, may qualify for the separate charitable-entity exemption described in the letter.

Q: Is this a binding answer for my business?
A: No. This is a General Information Letter. It gives a general overview and does not decide the tax result for a specific taxpayer’s facts.

Q: Does it cover self-collected home-rule taxes?
A: No. The Department says its guidance concerns state and state-administered taxes. Self-collected home-rule cities and counties may apply their own rules.

Citations and references

• § 39-26-104(1), C.R.S. (sales and use tax on tangible personal property)
• § 39-26-717, C.R.S. (medical supplies furnished by a doctor and other medical exemptions)
• § 39-26-718, C.R.S. (exemption for qualifying charitable entities)
• Department regulation 24-35-103.5 (GIL and private letter ruling procedure)

Source

• Landing page: https://tax.colorado.gov/all-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/default/files/documents/GIL_09-013.pdf

Original ruling text

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

GIL-09-013
July 07, 2009
XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
Re: medical supplies
Dear XXXXXXXXXX,
You request guidance regarding the applicability of Colorado sales and use tax to a variety of medical products sold by your company. The Department issues general information letters and private letter rulings. A general information letter provides a general overview of the applicable tax law and is not binding on the department. A private letter ruling is a determination of the applicability of tax to a specific set of circumstances and is binding in the department. A party requesting a private letter ruling must provide certain information and remit a fee. For more information about general information letters and private letter rulings, please refer to the Department’s regulation 24-35-103.5, C.R.S., which is available on our web site at: www.colorado.gov/revenue/tax. You have requested a general information letter. Issue Are various medical products manufactured by your company exempt from sales and use tax in Colorado? Background Your company sells a variety of medical equipment, which we generically refer to as catheters and related accessories, bandages, clamps, belts, syringes, lasers for treatment of varicose veins, infiltration pumps and related accessories designed for delivering local anesthesia, and compression stockings. Discussion. Colorado levies sales and use tax on the sale, use, storage, or consumption of tangivel personal property. §39-26-104(1), C.R.S. Medical supplies furnished by a doctor as part of professional services provided to a patient are exempt. § 39-26-717 C.R.S. In general, medical supplies that leave the doctor’s office with the patient are generally treated as exempt medical supplies. For example, bandages, catheters, and dressings are exempt when

GIL 09-013
July 7,
2009 Page
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provided by a doctor to a patient. Supplies that are used by a doctor to treat a patient but do not leave with the patient are not exempt, such as X-ray equipment. Purchases of certain medical supplies by charitable entities (generally those holding an IRS 501(c)(3) certificate) are exempt, regardless of whether they would be taxable if purchased by a physician. § 39-26-718 C.R.S. For example, a hospital may have an IRS 501(c)(3) certificate and, thus, qualify for this exemption. Department publication FYI Sales 68 provides an extensive list of supplies that qualify for exemptions. Please visit our web site at www.revenue.state.co.us and go to Tax > FYI / Publications > FYI > Sales Tax > FYI Sales 68 to view and download this publication. Miscellaneous Enclosed is a redacted version of this ruling. Pursuant to statute and regulation, this redacted version of the ruling will be made public within 60 days of the date of this letter. Please let me know in writing within that 60 day period whether you have any suggestions or concerns about this redacted version of the ruling.

Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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