CO GIL 14-007 Sales & Use Tax 2014-04-28

Are intrauterine devices (IUDs) subject to Colorado sales or use tax — hormonal versus copper?

Short answer: Exempt, by two different routes. A hormone-releasing IUD is treated as a prescription drug, so it's exempt from Colorado sales and use tax when dispensed pursuant to a prescription by a licensed provider. A copper IUD isn't a drug, but it still likely qualifies under the exemption for materials furnished by a licensed provider as part of professional services — because only a provider can insert an IUD and the patient leaves the office with it. An IUD does NOT qualify as durable medical equipment (it can't withstand repeated use and is worn in the body). (This is a General Information Letter: general guidance only, not binding on the Department.)

Disclaimer: This is an official Colorado Department of Revenue General Information Letter (GIL). A GIL is a good-faith general overview of the tax law; it is NOT binding on the Department, makes no specific determination on the facts, and cannot be relied upon as a ruling. It does not address sales or use taxes administered by self-collected home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Colorado tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A client asked whether intrauterine devices (IUDs) — small contraceptive devices inserted into the uterus — are subject to Colorado sales or use tax. IUDs are usually dispensed pursuant to a prescription, but sometimes without one.

The Department's answer: IUDs are exempt, via two different exemptions depending on the type:

Hormonal IUDs — exempt as prescription drugs. An IUD that releases hormones is treated as a drug. So any hormone-releasing IUD dispensed pursuant to a prescription by a licensed provider is exempt as a prescription drug (§ 39-26-717(1)(a)).
Copper IUDs — exempt as materials furnished by a provider. A copper IUD doesn't release hormones, so it isn't a drug. But it likely qualifies under the exemption for materials furnished by a licensed provider as part of their professional services (§ 39-26-717(1)(k)) — whether or not there's a prescription — because only a licensed provider can insert an IUD and the patient leaves the provider's office with it.
Not durable medical equipment. To be DME, equipment must (among other things) be dispensed by prescription, withstand repeated use, serve a medical purpose, not be useful absent illness/injury, and not be worn in or on the body. An IUD can't withstand repeated use, is worn in the body, and (the Department reasons) is useful absent illness/injury — so it doesn't qualify as DME (§§ 39-26-717(1)(j), (2)(a)).

Either way, the IUD comes out exempt — the only question is which exemption carries it.

What this means for you

Medical suppliers and providers

IUDs are exempt from Colorado state and state-administered sales/use tax. For hormonal IUDs, the path is the prescription-drug exemption (so keep the prescription). For copper IUDs, lean on the furnished-by-a-provider exemption — the insertion-by-a-licensed-provider fact is what carries it, even without a prescription. Don't try to fit an IUD into the durable medical equipment box; it doesn't qualify.

Healthcare providers

When you furnish and insert an IUD as part of professional services, that supports the exemption directly — particularly for copper IUDs that aren't "drugs."

Accountants and tax professionals

This letter is a clean map of § 39-26-717's overlapping medical exemptions: hormonal IUD → (1)(a) prescription drug; copper IUD → (1)(k) material furnished by a provider as part of professional services (prescription not required); and a reasoned rejection of the (1)(j)/(2)(a) durable-medical-equipment route (fails "withstand repeated use" and "not worn in the body"). Compare the prescription/provider-furnished analysis in [[gil-15-021-medical-equipment-and-supplies]] and the electrotherapy route in PLR 14-007.

Common questions

Q: Are IUDs taxable in Colorado?
A: No. The Department concluded IUDs are exempt — hormonal IUDs as prescription drugs, copper IUDs as materials furnished by a licensed provider as part of professional services.

Q: Does a copper IUD need a prescription to be exempt?
A: Not necessarily. Because only a licensed provider can insert it and the patient leaves with it, a copper IUD likely qualifies under the furnished-by-a-provider exemption whether or not there's a prescription.

Q: Why isn't an IUD "durable medical equipment"?
A: It can't withstand repeated use and is worn in the body (and the Department viewed it as useful absent illness or injury), so it fails the DME definition.

Q: Does this exemption cover home-rule city taxes?
A: The exemptions are from state and state-administered sales/use taxes. Self-collected home-rule cities set their own rules; check with them.

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

Citations and references

Statutes:
- § 39-26-717, C.R.S. (medical exemptions)
- § 39-26-717(1)(a), C.R.S. (prescription drugs dispensed/furnished by a licensed provider)
- § 39-26-717(1)(k), C.R.S. (materials furnished by a licensed provider as part of professional services)
- §§ 39-26-717(1)(j), (2)(a), C.R.S. (durable medical equipment exemption and definition)

Rules:
- Department Rule 24-35-103.5 (GIL / PLR procedure)

Source

Landing page: Colorado Sales & Use Tax Letter Rulings
Original PDF: GIL-14-007.pdf

Original ruling text

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

GIL-14-007
April 28, 2014
XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
Re: Intrauterine Devices
Dear XXXXXXXXXXX,
You submitted on behalf of your client (“Company”) a request for guidance to determine
whether intrauterine devices are subject to Colorado sales or use tax.
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 Rule 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 Department Rule 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
Are intrauterine devices subject to Colorado sales or use tax?
Background
Intrauterine devices (IUDs) are small medical devices that are inserted into the uterus and act as a
contraceptive. Company asserts that IUDs are usually dispensed pursuant to a prescription, but
can, at times, be dispensed without a prescription.
Discussion
Colorado exempts a number of medical supplies from state and state-administered sales and use

taxes.1 Specifically, Colorado exempts “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.”2
An IUD that releases hormones is considered a drug. As a result, it appears that any IUD
dispensed pursuant to a prescription that releases hormones will be exempt from Colorado
sales and use taxes as a prescription drug dispensed pursuant to a prescription by a licensed
provider.
Copper IUDs do not appear to be a prescription drug, so we look to another exemption for
which it may qualify. An IUD, whether furnished to a patient pursuant to a prescription or not,
will likely qualify for the exemption for materials furnished by a licensed provider as part of their
professional services because only a licensed provider can insert an IUD and the patient
leaves the licensed provider’s office with the IUD.3
Company also raises the question of whether an IUD could be eligible for the durable medical
equipment exemption. In order to be eligible for the durable medical equipment exemption,
such equipment must be dispensed pursuant to a prescription, can withstand repeated use, is
primarily and customarily used to serve a medical purposes, is generally not useful to a person
in the absence of illness or injury, and is not worn in or on the body.4 Because an IUD cannot
stand repeated use, does not serve a medical purpose, is useful to a person in the absence of
illness or injury, and is worn in the body, an IUD is not eligible for the durable medical
equipment exemption.
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
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2
3
4

§39-26-717, C.R.S.

§39-26-717(1)(a), C.R.S.
§39-26-717(1)(k), C.R.S.
§§ 39-26-717(1)(j) and 717(2)(a), C.