Which of these are taxable in Colorado: garden seeds and plants, glucose tablets, rehydration products, glucose/urinalysis test strips, pregnancy and ovulation test kits, and a coupon book?

Plain-English summary

A tax firm asked the Department to sort the Colorado sales-tax treatment of a retailer's product lineup: garden seeds and plants, blood glucose tablets, an unlabeled rehydration "Product," glucose monitoring strips, urinalysis reagent strips, home pregnancy test kits, ovulation test kits, and a coupon book. Colorado taxes tangible personal property unless a specific exemption applies; several exemptions are in play.

Seeds, plants, and trees — exempt only for commercial agriculture. Section 39-26-716 exempts property used in commercial agricultural operations (farm/dairy equipment, pesticides, livestock drugs), including "feed for livestock, … seeds, and … orchard trees" (§ 39-26-716(4)(b)). So if these seeds/plants are used in a commercial agricultural operation — food-producing or not — they're exempt; otherwise they're taxable. That tracks Colorado's treatment of seeds/plants as food: the food-for-home-consumption exemption excludes seeds and plants used to grow food (§ 39-26-102(4.5)). (FYI Sales 64.)

Blood glucose tablets — likely a taxable dietary supplement, despite a Nutrition Facts label. Colorado defines exempt "food" through the USDA SNAP/WIC programs, which exclude dietary supplements. Items with a "Nutrition Facts" label generally qualify as food (exempt); items with a "Supplement Facts" label are dietary supplements (not exempt). These tablets carry a Nutrition Facts panel, but the Department had "serious reservations" that they're food — they're used to regulate blood sugar, not as a food source, and many brands carry a Supplement Facts label. (Note: a separate exemption covers glucose usable for treatment of insulin reactions as a medical item, § 39-26-717(c).)

Unlabeled rehydration "Products" — undetermined; ask USDA. With no FDA/Supplement/Nutrition Facts panel, the manufacturer can request a USDA food determination (submit a sample). The Department may revisit if USDA finds it's not a food/meal replacement.

Glucose strips, urinalysis strips, pregnancy kits — exempt blood/urine tests. Colorado exempts "blood- and urine-testing kits and materials" (§ 39-26-717(d)). FYI Sales 68 lists exempt items by name — chemstrip, dextrostix, glucostix, hematest, microstix, multistix, pregnancy test, pregnosticon test — so glucose monitoring strips, urinalysis reagent strips, and home pregnancy test kits are exempt. (Glucose-monitoring supplies that don't qualify as blood/urine tests are exempt only if sold pursuant to a prescription meeting § 39-26-717.)

Ovulation test kits — not on the exempt list. These aren't among the enumerated blood/urine tests, so they're not clearly exempt — exempt only if they meet § 39-26-717 (e.g., sold by prescription), otherwise taxable.

Coupon book — undetermined. Colorado has no authority on point. Many states treat a coupon book as non-taxable — the coupons are an intangible right to buy at a future time, not tangible property. But the Department noted a coupon book with significant content (e.g., menus and information of value) may be a physical book (taxable property), not merely intangible discounts — and it declined to decide in a GIL. Separately, if a vendor is reimbursed for the value of a redeemed coupon, that reimbursement is itself subject to sales tax.

What this means for you

Garden centers, nurseries, and farm suppliers

Who's buying and why controls seeds and plants. Sales for a commercial agricultural operation are exempt (§ 39-26-716(4)(b)); sales to a home gardener are taxable, because the food exemption doesn't reach seeds/plants used to grow food. Document the agricultural use to support exempt treatment.

Pharmacies, grocers, and medical-supply retailers

Blood/urine test items named in FYI Sales 68 (glucose strips, urinalysis strips, pregnancy tests) are exempt — but ovulation kits aren't listed, so treat them as taxable absent a qualifying prescription. Glucose tablets are risky: a Nutrition Facts label doesn't guarantee "food," and the Department leans toward taxable dietary supplement. For an unlabeled food-type product, get a USDA determination before treating it as exempt.

Retailers selling coupon/entertainment books

Treatment is unsettled in Colorado. A book that's just coupons looks like a non-taxable intangible, but one packed with menus and content may be a taxable book — consider requesting a private letter ruling. And remember any reimbursement you receive for a coupon's value is taxable.

Accountants and tax professionals

Four exemption regimes collide here: commercial-agriculture (§ 39-26-716(4)(b)), food (§ 39-26-102(4.5), SNAP/WIC label test, dietary-supplement carve-out Reg 39-26-102.4.5(b)(9)), medical (§ 39-26-717(d) blood/urine tests; FYI Sales 68 enumerated list; Rx route), and the unsettled coupon-book question (intangible-right vs. physical-book; taxable coupon reimbursement). Exemptions are narrowly construed, and the enumerated FYI Sales 68 list is the safe harbor for test kits. Cross-refs: medical exemptions [[gil-13-012-sutures-and-iv-catheters]] and [[gil-13-005-tear-serum-testing-modules]]; agriculture/farm exemption [[gil-14-020-marijuana-rfid-tags]]; food exemption [[plr-25-004-sales-tax-exemption-for-items-sold-by-bakery]] and [[gil-15-019-nonessential-food-articles]]. Watch the home-rule-city caveat below.

Common questions

Q: Are garden seeds and plants taxable in Colorado?
A: They're exempt only if used in a commercial agricultural operation (§ 39-26-716(4)(b)). Bought by a home gardener to grow food, they're taxable — the food exemption excludes seeds and plants used to grow food.

Q: Are glucose strips, urinalysis strips, and home pregnancy tests exempt?
A: Yes. They're exempt "blood- and urine-testing kits and materials" under § 39-26-717(d), and FYI Sales 68 lists them by name.

Q: What about ovulation test kits?
A: They aren't on the exempt blood/urine list, so they're not clearly exempt — taxable unless sold by prescription meeting § 39-26-717.

Q: Are blood glucose tablets exempt as food?
A: Maybe not. Despite a Nutrition Facts label, the Department had serious reservations — they regulate blood sugar rather than serve as food, and many brands carry a Supplement Facts (taxable dietary-supplement) label.

Q: Is a coupon book taxable?
A: Undetermined. Many states treat it as a non-taxable intangible right, but a book with substantial content (menus, info) may be a taxable physical book — and any reimbursement for a coupon's value is taxable. Consider a private letter ruling.

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, rules, and guidance:
- §§ 39-26-104, 39-26-202, C.R.S. (sales/use tax on tangible personal property)
- § 39-26-716(4)(b), C.R.S. (commercial-agriculture exemption: seeds, livestock feed, orchard trees); FYI Sales 64
- § 39-26-102(4.5), C.R.S. (definition of "food," SNAP/WIC; excludes dietary supplements and seeds/plants to grow food); Reg 39-26-102.4.5(b)(9)
- § 39-26-717, C.R.S. (medical exemptions, incl. (c) glucose for insulin reactions and (d) blood-/urine-testing kits and materials); FYI Sales 68

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-13-017.pdf

Original ruling text

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

GIL-13-017
May 14, 2013
XXXXXXXXXXXXXX
ATTN: XXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Re: Seeds and Plants, Food and Dietary Supplements, Medical Supplies, Test Kits, and a Coupon
Book
Dear XXXXXXXXX,
XXXXXXXXXX (“Company”) submitted on behalf of your client (“Retailer”) a request for guidance to
determine the applicability of Colorado sales and use tax on certain seeds and plants, food and
dietary supplements, medical supplies, test kits, and a coupon book.
The Colorado Department of Revenue (“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
1. Are vegetable or fruit seeds, flower seeds, fruit trees and vegetable plants subject to
Colorado taxes?
2. Are blood glucose tablets subject to Colorado taxes?
3. Are Products subject to Colorado taxes?
4. Are glucose monitoring strips subject to Colorado taxes?
5. Are reagent strips for urinalysis subject to Colorado taxes?
6. Are home pregnancy test kits subject to Colorado taxes?
7. Are ovulation test kits subject to Colorado taxes?
8. Is a coupon book subject to Colorado taxes?

Background
Company is a tax services firm that provides comprehensive state, local, federal, and international
tax advisory and consulting services on a multi-jurisdictional basis. Retailer sells a number of
products and Company is inquiring about the tax obligation for each product.
The following facts are provided by Company:
1. The blood glucose tablets in question are labeled with a Nutrition Facts panel.
2. XXXXXXXXXX (“Products”) encompass several different products and comes in a
number of different forms. Products are used to prevent dehydration in children by
replenishing minerals and nutrients lost during illness. Products are not labeled with FDA
Drug Facts panel, Supplement Facts panel or Nutrition Facts panel.
3. Reagent strips for urinalysis are used as a glucose monitoring devices to detect protein
and fats in the urine.
4. The coupon book contains tear-out coupons redeemable at local establishments such as
restaurants, hotels, entertainment centers, etc. Upon redeeming these coupons at the local
establishments, customers are given a discount by the local establishments on goods or
services rendered (i.e., two meals for the price of one, an additional free night's stay at a
hotel, reduced admission fees to a theater, etc.)
Discussion
Colorado imposes sales and use tax on the sale, use, storage, and consumption of tangible
personal property.1 There are several exemptions that may be applicable here.
Vegetable and Fruit Seeds, Flower Seeds, Fruit Trees and Vegetable Plants
Section 39-26-716, C.R.S. exempts a variety of tangible personal property used in commercial
agricultural operations, such as farm equipment, dairy equipment, pesticides, and drugs and
agricultural compounds used in the care and treatment of livestock. Included this list of exempt
items are:
(4)(b) All sales and purchases of feed for livestock, all sales and purchases of seeds,
and all sales and purchases of orchard trees and the storage, use, or consumption of
such property.
The exemptions listed under §39-26-716, C.R.S. are intended to encompass specific
exemptions for commercial agriculture and livestock operations. If these seeds and plants are
being used in a commercial agricultural operation, whether the seeds are food-producing or
not, then the seeds are exempt from state or state-collected local sales or use taxes under
§39-26-716.4(b), C.R.S..2 Seeds and orchard trees that are not used for a commercial
agricultural purpose are not exempt. This is consistent with Colorado’s tax treatment of seeds
and plants as food. The definition of food sold for domestic home consumption, which is
exempt from tax, excludes seeds and plants to grow food. 3

1 §39-26-104 and 202, C.R.S. (sales and use tax apply to the sale, use, storage, or consumption of tangible
personal property). You can view this and other statutes, regulations, and Department publications by visiting
our web site at www.colorado.org/revenue/tax > Tax Library.
2
Department Publication FYI Sales 64, “Sales Tax Exemptions on Seeds, Plants and Trees.”
3
§39-26-102(4.5), C.R.S.

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Blood Glucose Tablets
Colorado defines food by adopting the definition of food used by USDA’s SNAP and WIC
programs. These federal programs exclude dietary supplements from the definition of food.4
Colorado incorporates these federal requirements and limitations in its regulation of food.5
To determine whether an item qualifies as food, USDA relies on the food label required by the
FDA.6 Items that carry a “Nutrition Facts” label qualify as food under the SNAP and WIC
programs. A “dietary supplement” carries a “Supplement Facts” label and explicitly states that
it is a “dietary supplement” on the front of the product. Generally, food items that carry a
“Nutrition Facts” label qualify as “food” for Colorado sales and use tax purposes, and food
items that carry the “Supplement Facts” label are dietary supplements and do not qualify as
“food” for the Colorado sales tax exemption. However, the Department has serious
reservations about whether blood glucose tablets constitute food. These tablets are primarily
used to regulate blood sugar levels and not as a food source. In addition, many other brands
of glucose tablets carry a “Supplement Facts” label rather than a “Nutrition Facts” label.
Products
Items without a nutrition or supplement facts label can have a determination made by USDA by
submitting a complete product package or sample of the item(s) requested by mail or email to:
Chief
Retailer Management and Issuance Branch
Benefit Redemption Division
Supplemental Nutrition Assistance Program
USDA, Food and Nutrition Service
3101 Park Center Drive, Room 404
Alexandria, VA 22302
OR EMAIL TO: [email protected]
Depending on USDA’s determination, the Department may revisit this issue if the product
clearly does not constitute a food, food product or meal replacement.
Glucose Monitoring Devices, Reagent Strips for Urinalysis, Home Pregnancy Test Kits,
Ovulation Test Kits
Colorado exempts certain drugs, medical equipment and supplies from state and stateadministered sales and use taxes. Among those exempt items are:
4

5

6

http://www.fns.usda.gov/snap/retailers/eligible.htm. How FNS Determines Product Eligibility for SNAP Purchase
and http://www.fns.usda.gov/wic/benefitsandservices/foodpkgregs.htm. Regulatory Requirements for WICEligible Foods (Medical Foods).
With respect to dietary supplements, Department regulation 39-26-102.4.5(b)(9) states that “These products
[vitamins, minerals and other dietary deficiency correctors] serve as supplements to food or food products rather
than as food and, therefore, are not eligible for the food exemption. Because essential vitamins and minerals
occur naturally in foods, a good diet will include a variety of foods that together will supply all nutrients needed.
Since these products serve as deficiency correctors or therapeutic agents to supplement diets deficient in
essential nutrition rather than as foods, they are not eligible.” The distinction here can be difficult to apply.
Because of this difficulty, and as discussed in footnote 7, below, the USDA now relies on the Federal Drug
Administration (FDA) label selected by the manufacturer to make this distinction.
The FDA advised the Department that the manufacturer is responsible for determining which label (Nutrition
Label v. Supplement Label) is appropriate for its product. That is, the FDA accepts the election made by the
manufacturer for purposes of determining whether the item falls within the definition of “food” for the SNAP and
WIC programs.

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(a) All sales of prescription drugs dispensed in accordance with a prescription by a
licensed provider or furnished by a licensed provider as part of professional services
provided to a patient or client;
(b) All sales of insulin in all its forms dispensed pursuant to the direction of a licensed
provider;
(c) All sales of glucose useable for treatment of insulin reactions;
(d) All sales of urine- and blood-testing kits and materials;
(e) All sales of insulin measuring and injecting devices, including hypodermic syringes
and needles;
…
(h)
(I) All sales of medical, feeding, and disposable supplies, including any related
accessories, for incontinence, infusion, enteral nutrition, ostomy, urology, diabetic
care, and wound care dispensed pursuant to a prescription.
(II) For purposes of this paragraph (h), “prescription” means any order in writing,
dated and signed by a licensed physician, physician's assistant, or advanced
practice nurse with prescriptive authority, or given orally by such a person and
immediately reduced to writing by the pharmacist, assistant pharmacist, or pharmacy
intern, or by a representative of a business licensed to sell items described in
subparagraph (I) of this paragraph (h) so long as such order is also followed by an
electronic submission of the order to the business, specifying the name and address
of the person for whom an item described in subparagraph (I) of this paragraph (h) is
ordered and directions, if any, to be included with such item. 7
More specifically, Department Publication FYI Sales 68, “Medical and Dental Supplies and
Equipment,” states that,
“The following fall under the definition of blood or urine tests, which are exempt:
chemstrip
dextrostix strips
glucostix
hematest
microstix
multistix
pregnancy test
pregnosticon test”
Additionally, glucose monitoring supplies that do not qualify for an exemption under the
definition of blood and urine tests are exempt when sold pursuant to a prescription and meet
the necessary requirements listed under §39-26-717, C.R.S..
Coupon Book
The Department has no publication, regulation, or statute that addresses the issue of sales of
coupon books. However, a number of states treat the sale of a coupon book as a non-taxable
sale because the coupons represent an intangible right to purchase merchandise at some
future time and do not represent the purchase of tangible personal property. However, the
Department does not make the determination whether coupon books are exempt or taxable in
the context of a general information letter. The Department notes that some coupons books are
7

§39-26-717, C.R.S.

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more than simply a collection of coupons and contain significant information about the retailer,
such as menus. This information itself is of value to the customer and suggests that the book
may be more properly viewed as a physical book and not simply an intangible right to
discounts. We also note that if a vendor is reimbursed, in full or in part, for the value of the
coupon, the reimbursement amount will also be subject to sales tax.8 If you would like a
determination on this issue, please request a private letter ruling by resubmitting a request and
fee in compliance with Department Regulation 24-35-103.5.
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,
Office of Tax Policy
Colorado Department of Revenue

8

See, Illinois Private Letter Ruling No. ST 92-0029-PLR, 1/13/1992; California Sales and Use Tax Annotation No.
280.0000. 280.0523, “Entertainment Books;” Iowa Admin. Code 701--213.14 (423), “Redemption of meal tickets,
coupon books and merchandise cards as a taxable sale;” Wisconsin Sales and Use Tax Report No. 3-72,
09/01/1972.

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