Are prescribed insulin infusion pumps and related disposable supplies exempt from Colorado sales tax?

Plain-English summary

Colorado’s Department of Revenue addressed subcutaneous insulin infusion pumps and related disposable supplies sold by mail order after a licensed physician’s prescription. It said Colorado exempts several types of diabetes-related property, including insulin measuring and injecting devices, and concluded that the described infusion pump and related supplies appear to fit that category.

The letter did not decide whether the products qualified under every other medical exemption. It relied on the pump’s function: it measures an insulin dosage and injects the insulin. The letter also refers readers to Department FYI Sales 68, which lists infusion pumps and insulin syringes as exempt patient supplies.

What this means for you

Medical equipment providers

A prescribed infusion pump and related disposable supplies may qualify for the insulin measuring and injecting device exemption described in the letter. Keep the prescription and product facts that support the classification.

Patients and healthcare businesses

The letter addresses products prescribed by a licensed physician and sent directly to the patient or consumer. Different products or sales facts may require a separate analysis.

Accountants and tax professionals

The Department framed this as a general overview and said it did not decide other possible exemption provisions. Treat the device classification and prescription facts as material to the guidance.

Common questions

Q: Why did the Department treat the pump as exempt?
A: It said the infusion pump and related disposable supplies appear to be insulin measuring and injecting devices because the pump measures an insulin dosage and injects insulin.

Q: Does the letter decide every exemption that could apply? A: No. It says the products may qualify under other exemptions but does not decide those issues because the insulin-device category appeared sufficient.

Q: Is this binding on the Department?
A: No. A General Information Letter is a general discussion of tax issues and is not binding on the Department.

Q: Does it cover self-collected home-rule taxes?
A: No. The Department’s guidance concerns state and state-administered taxes. Self-collected home-rule jurisdictions may have separate rules.

Citations and references

• §§ 39-26-104(1)(a) and 202, C.R.S. (sales and use tax on tangible personal property)
• § 39-26-717, C.R.S. (medical and therapeutic device exemptions)
• 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_11-005.pdf

Original ruling text

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

GIL-11-005
April 26, 2011
XXXXXXXXXXXXXXXXXXXXX
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ATTN: XXXXXXXXXXXXXXXX
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Re: Taxability of Insulin Infusion Pumps / Sales Tax
Dear XXXXXXXXXXX,
You submitted on behalf of XXXXXXXXXXX (“Company”) a request for guidance on the application of sales tax on diabetes related medical equipment. The department discontinued issuing general information letters in late 2009 because of budgetary cutbacks, but has recently reinstated issuing these letters. The department issues general information letters and private letter rulings. A general information letter provides a general overview of the relevant tax issues and is not binding on the department. A private letter ruling provides a specific determination for a specific set of facts, is binding on the department but not the taxpayer, and requires payment of a fee. For more information about general information letters and private letter rulings, please see Department regulation 24-35103.5 at www.taxcolorado.org > FYI/Publication > Rulings. The department initially treats your request as one of a general information letter. If you would like the department to issue a private letter ruling on the issues you raise, you can resubmit a request and fee in compliance with regulation 24-35-103.5. It is important to remember that general information letters, such as this one, are general discussions of tax law and are not a determination of the tax consequence of any particular action or inaction. Issue Is diabetes related medical equipment prescribed to a patient by a licensed physician exempt from sales tax? Background Company is a medical equipment provider and manufacturer of subcutaneous insulin infusion pumps and related disposable supplies that assist individuals in the treatment of diabetes. A licensed physician must prescribe one of Company’s products before the product will be mail ordered directly to patient / consumer. Company wishes to clarify whether the diabetes related medical equipment is subject to Colorado sales tax. Discussion

Colorado levies sales and use tax on the sale or use of tangible personal property. §§39-26-104(1)(a) and 202, C.R.S. However, Colorado exempts from sale and use tax a variety of tangible personal property related to the treatment of diabetes, including:
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Drugs dispensed in accordance with a prescription.
Insulin in all its forms dispensed pursuant to the direction of a licensed physician. Glucose used for treating insulin reactions. Blood and urine testing kits and materials. Insulin measuring and injecting devices, including hypodermic needles and syringes. Prosthetic devices. All sales of drugs and materials when furnished to a patient by a doctor as part of professional services. Therapeutic devices, appliances or related accessories which are sold to correct or treat a human physical disability or surgically created abnormality. Any such device with a retail value of more than $100 must have a written recommendation from a licensed doctor to be exempt.

§39-26-717, C.R.S. The infusion pump and related disposable supplies appear to fall within the category of “insulin measuring and injection devices” because the pump measures an insulin dosage and injects the insulin. See, also, department FYI Sales 68 Medical and Dental Supplies and Equipment, page 4, which lists, among other patient supplies, infusion pumps and insulin syringes as exempt. Although these products may qualify for other exemptions noted above, we do not decide those issues here because the goods appear to qualify as an insulin measuring and injecting device. The majority of other states we reviewed follow a similar approach. See, for example, Texas Policy Letter Ruling No. 8208L0473C01, 08/01/1982, (Infusion pumps and related disposables used to treat diabetes are considered therapeutic appliances, which are exempt from tax when sold under a doctor’s prescription); Washington Tax Determination No. 92-163, 12 WTD 199, 06/24/1992, (Washington exempts from retail sales tax and use tax “prescription” and “other substances.” Infusion pumps are included in “other substances”); Ga. Code Ann. § 48-8-3 Exemptions, (The sale or use of durable medical equipment, which includes infusion pumps, is exempt when prescribed by a physician); Massachusetts Letter Ruling No. 82-111, 11/29/1982, (Sales of prescription infusion pumps, tubing and batteries used to administer insulin and other substances are exempt from sales tax); Minnesota Sales Tax Fact Sheet No. 117B, 04/01/2010, (Durable medical equipment that can withstand repeated use, which includes drug infusion pumps, are exempt from sales and use tax) Miscellaneous Pursuant to state law and department regulation 24-35-103.5, noted above, the Department will make public a redacted version of this letter. Your letter requesting this general information letter is not made public. I enclose a proposed redacted version of this letter. Please contact me within 60 days from the date of this letter if you have any questions, comments, or objection concerning the redacted letter. I hope this is helpful. Please feel free to contact me if you have any questions. Sincerely, Office of Tax Policy Colorado Department of Revenue 2