Are tear/serum osmolarity testing modules exempt from Colorado sales tax as 'blood and urine testing kits and materials'?

Plain-English summary

A physician's office that performs eye examinations buys TearLab serum testing modules — single-use test cards (one per eye) that measure a patient's serum/tear osmolarity in an instrument. It asked whether the modules are exempt from Colorado sales/use tax as "blood and urine testing kits and materials," reasoning that tears contain serum and the test is performed much like a blood or urine test.

The Department's answer: no — the modules are taxable. The reasoning is a textbook application of how Colorado reads tax exemptions:

• Colorado exempts the sale of blood and urine tests (§ 39-26-717(d)).
• But statutory exemptions are narrowly construed: a product that doesn't clearly fall within the exemption's terms is not exempt, the party claiming the exemption bears the burden of establishing it clearly applies, and exemptions are given their plain, commonly understood meaning (RTD v. Charnes; Security Life & Accident v. Heckers; General Motors v. Denver).
• "Blood" and "urine" have specific, commonly understood meanings that do not include tears produced by the eye. The Department wouldn't expand the terms to reach tear/serum osmolarity testing, even accepting that tears contain serum and the tests share some characteristics.
• There may be policy arguments for covering tear testing, "but the legislature has not so provided."

So the tear serum testing modules fall outside the blood-and-urine exemption and are subject to tax.

What this means for you

Physicians, optometrists, and medical practices

Buying a diagnostic test kit doesn't make it tax-exempt just because it resembles an exempt one. Colorado's medical exemptions are specific and narrowly read — the blood-and-urine-test exemption covers blood and urine, not tears or other fluids, however analogous the procedure. Budget for sales/use tax on tear-osmolarity and similar testing supplies unless a specific exemption names them.

Medical-device and lab-supply sellers

When a customer asks you to treat a product as exempt by analogy to a listed item, the safe answer is usually no absent statutory language that clearly covers it. The buyer — not you — bears the burden, and the Department resolves doubt against the exemption.

Accountants and tax professionals

This is a clean narrow-construction holding under § 39-26-717(d). The trio of authorities (Charnes, Security Life, General Motors v. Denver) sets the rule: narrow construction, burden on the claimant, plain meaning. Analogy and policy don't extend an enumerated medical exemption — only the legislature can. For the broader medical-exemption family (DME, mobility-enhancing, prescription-routed items), compare [[gil-14-024-walk-in-bathtubs-wheelchair-lifts-modular-ramps]] and [[gil-15-017-replacement-batteries-in-electric-wheelchairs]]. Watch the home-rule-city caveat below.

Common questions

Q: Are tear/serum osmolarity test kits exempt from Colorado sales tax?
A: No. The Department concluded they don't fall within the blood-and-urine testing exemption (§ 39-26-717(d)), so they're taxable.

Q: Why doesn't the blood-and-urine exemption cover a tear test?
A: Exemptions are narrowly construed and given their plain meaning. "Blood" and "urine" don't commonly include tears, so the Department wouldn't extend the exemption to tear testing — even though tears contain serum.

Q: The test is medically similar to a blood test — doesn't that count?
A: No. Medical or procedural similarity isn't enough. The exemption names specific fluids, and the burden is on the party claiming the exemption to show the product clearly fits.

Q: Could this change?
A: Only if the legislature amends the exemption to include tear or serum testing. The Department noted policy arguments exist "but the legislature has not so provided."

Q: Can I rely on this letter?
A: No. A General Information Letter is general guidance, not binding on the Department, and makes no determination on specific facts. It also doesn't cover self-collected home-rule city taxes.

Citations and references

Statutes and cases:
- § 39-26-717(d), C.R.S. (exemption for the sale of blood and urine testing kits and materials)
- Regional Transp. Dist. v. Charnes, 660 P.2d 24 (Colo. App. 1982); Security Life & Accident Co. v. Heckers, 177 Colo. 455, 495 P.2d 225 (1972) (exemptions narrowly construed)
- General Motors v. City and County of Denver, 990 P.2d 59 (Colo. 1999) (burden on the party asserting the exemption)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-13-005.pdf

Original ruling text

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

GIL-13-005
February 6, 2013
XXXXXXXXXXXXXXXXXXX
ATTN: XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
Re: Tear Serum Testing Modules
Dear XXXXXXXXXXXXXX,
You submitted on behalf of XXXXXXXXXXXXXXXXXXXX (“Company”) a request for guidance
on the application of sales and use tax on TearLab™ serum testing modules (“Product”).
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 on the taxpayer, and requires payment of a fee. For more information about
general information letters and private letter rulings, please see Department regulation 24-35-103.5
at www.colorado.gov/revenue/tax > Tax Library > 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 Product exempt from Colorado sales or use tax as blood and urine testing kits and materials
because the testing modules are similar in nature to that of a blood and urine testing kit?

Background
Company is a physician’s office that performs eye examinations along with procedures to help
correct eye impediments. Company requests clarification on whether sales or use tax is due on
Product if sold to a physician’s office. Product uses a test card in an instrument that tests a
patient’s serum / tear osmolarity. One card is used for each eye and the card cannot be used

again. Company represents that Product is similar to blood and urine test kits because blood and
urine test kits use similar items (presumably the card).
Discussion
We understand the serum/tear osmolarity test measures certain properties of tears, a component of
which is serum. We further understand that serum is a fluid produced by the body and is found in
both tears and in blood. We accept for purposes of our analysis here Company’s representation
that tests for blood and tears have some common characteristics in the manner they are performed.
Colorado provides a number of exemptions for medical supplies. One such exemption is for the
sale of blood and urine tests.1 In general, statutory exemptions to sales tax are narrowly construed,
which means that a product that does not clearly fall with the terms of the exemption statute is not
exempt.2 The party asserting the exemption has the burden of establishing that it clearly is entitled
to the exemption.3 Finally, we interpret statutory exemptions to give them their plain and commonly
understood meaning.
With these rules of interpretation in mind, we do not believe that the term “blood test” as used in the
statute includes a test relating to tears produced by the eye. Blood and urine have specific and
commonly understood meanings. We do not believe that these meanings include fluids (tears)
produced by the eye. Moreover, a narrow interpretation of these exemptions forecloses any
expansion of their terms to include tests relating to tears. Although there may be policy arguments
for including serum/tear osmolarity testing in the exemption statute, the legislature has not so
provided.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable on
state taxes issues. However, the Department does not make a specific determination here on any
of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by home-rule cities and home-rule counties.
You may wish to consult with local governments which administer their own sales or use taxes
about the applicability of those taxes. Visit our web site at www.colorado.gov/revenue/tax for more
information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted letter
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 letter.
Sincerely,

1
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See, §39-26-717(d), C.R.S. This statute as well as Department publications can be viewed at
www.colordo.gov/revenue/tax > Tax Library.
Regional Transp. Dist. v. Charnes, 660 P.2d 24, 25 (Colo. App. 1982); Security Life & Accident Co. v.
Heckers, 177 Colo. 455, 495 P.2d 225, 226 (1972).
General Motors v. City and County of Denver, 990 P.2d 59 (Colo. 1999).

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Office of Tax Policy
Colorado Department of Revenue

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