Are fluoride varnish and oral-health kits sold to dental and medical providers exempt from Colorado sales tax?

Plain-English summary

A nonprofit (a 501(c)(3)) sells oral-health kits and fluoride varnish to medical and dental providers as part of a children's oral-health program. The kits contain a single dose of fluoride varnish, gauze pads, instructions, toothbrushes, parent education cards, and a zip-lock bag; the provider uses the gauze and varnish on the patient and sends the rest home. The nonprofit asked whether these sales are exempt from Colorado sales/use tax. The Department walked through two possible exemptions and landed on the second.

1. Prescription-drug exemption — does NOT apply. Colorado exempts prescription drugs dispensed under a licensed provider's prescription. But "[t]he Food and Drug Administration does not classify fluoride varnish as a drug but, rather, as a class II medical device" (21 CFR 872.3260). So "neither the kit nor fluoride varnish qualify under the exemption for drugs dispensed pursuant to a prescription."

2. Materials-furnished-by-a-provider exemption — appears to APPLY. Colorado also exempts "materials furnished by a licensed provider as part of professional services provided to a patient." The Department assumed the medical/dental staff are licensed providers (or supervised by one) — noting that dentists and dental hygienists are "licensed providers" authorized to apply fluoride varnish (§ 12-35-128(1)(a)(II)(C), C.R.S.). On that assumption, "the fluoride varnish and the other items in the kit appear to be materials furnished by licensed providers in connection with providing professional services to patients and, therefore, would be exempt."

So the practical takeaway: fluoride varnish isn't a tax-exempt "drug," but because a licensed dental/medical provider furnishes it (and the rest of the kit) as part of patient care, the sales appear exempt under the separate provider-materials exemption. Because this is a General Information Letter, it's guidance built on that licensed-provider assumption, not a binding determination.

What this means for you

Dental and medical product suppliers

Don't assume an item is taxable just because it fails the prescription-drug test. Colorado has a separate exemption for materials a licensed provider furnishes to a patient as part of professional services. Fluoride varnish — a Class II device, not a drug — still appears exempt on that basis when applied by a dentist, dental hygienist, or other licensed provider (or someone under their supervision). The exemption depends on who furnishes and uses the materials, so the buyer being a licensed provider matters.

Dental offices, hygienists, and clinics

Materials you furnish to patients as part of providing professional dental/medical services can fall within the provider-materials exemption. The Department specifically recognized that hygienists may apply fluoride varnish under a dentist's direction.

Accountants and tax professionals

Two distinct medical exemptions are in play under § 39-26-717: (1)(a) prescription drugs — fails here because FDA classifies fluoride varnish as a Class II medical device (21 CFR 872.3260), not a drug; and (1)(k) materials furnished by a licensed provider as part of professional services — appears to apply. "Licensed provider" is keyed to title 12 prescribing authority; dentists and hygienists qualify (§ 12-35-128(1)(a)(II)(C)). The conclusion is expressly conditioned on the staff being licensed providers or supervised by one, and the Department only said the items "appear" exempt.

Common questions

Q: Is fluoride varnish a tax-exempt prescription drug in Colorado?
A: No. The FDA classifies fluoride varnish as a Class II medical device, not a drug, so it doesn't qualify for the prescription-drug exemption.

Q: Then why does the Department say it appears exempt?
A: Because of a different exemption — for materials a licensed provider furnishes to a patient as part of professional services. Applied by a dentist or hygienist, the varnish (and the rest of the kit) appears to qualify.

Q: Are the whole kits exempt, or just the varnish?
A: The Department said the fluoride varnish "and the other items in the kit" appear to be materials furnished by licensed providers as part of professional services, and therefore would be exempt.

Q: What's the catch?
A: The exemption assumes the staff are licensed providers (or supervised by one). If items are sold to or used by someone who isn't a licensed provider acting in professional services, the analysis could differ.

Q: Is this letter binding?
A: No. A General Information Letter is general guidance and is not binding on the Department; it makes no specific determination. For a binding answer, request a private letter ruling.

Q: Does this cover city sales tax?
A: No. The Department administers state and state-collected local taxes only; self-collected home-rule cities and counties set their own rules.

Citations and references

Statutes and rules:
- § 39-26-104, C.R.S. (sales tax); § 39-26-202, C.R.S. (use tax)
- § 39-26-717(1)(a), C.R.S. (exemption for prescription drugs — does not apply to fluoride varnish)
- § 39-26-717(1)(k), C.R.S. (exemption for materials furnished by a licensed provider as part of professional services — appears to apply)
- 21 CFR 872.3260 (FDA classifies fluoride varnish as a Class II medical device)
- § 12-35-128(1)(a)(II)(C), C.R.S. (dental hygienists authorized to apply fluoride varnish under a dentist's direction; dentists/hygienists are "licensed providers")

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-17-007.pdf

Original ruling text

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

GIL-17-007

March 16, 2017
XXXXXXXXXXXXXXXXX
Attn: XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
Re: Fluoride Varnish
Dear XXXXXXXXXXXXX,
You submitted on behalf of your client (“Company”) a request for guidance on whether
sales or use tax applies to Company’s Cavity Free at Three kits and fluoride varnishes.
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, but 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 1 CCR 201-1,
24-35-103.5.
The Department treats this request as a general information letter. It is important to
remember that general information letters, such as this one, are general discussions of tax
law and are not binding on the Department. If Company would like the Department to
issue a private letter ruling on the issue raised here, Company can submit a request and
pay the fee in compliance with Department Rule 1 CCR 201-1, 24-35-103.5.
Issue
1. Does sales tax apply to Company’s sales of XXXXXXXXXXXXXXX kits?
2. Does sales tax apply to Company’s sales of fluoride varnish?
Background
The XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX administers a program called
XXXXXXXXXXXXXX. XXXXXXXXXXXXX trains providers to conduct oral health
screenings and apply a fluoride varnish. This program also trains medical and dental
providers to teach children and pregnant mothers about the importance of oral health and
hygiene and how to brush, floss, and implement a fluoride treatment.
Company is a nonprofit organization that holds a 501(c)(3) certificate from the Internal
Revenue Service. Company sells XXXXXXXXXXXXXX kits to medical and dental

providers to be used according to the training provided under the program. The kits
contain materials to perform an infant oral evaluation and fluoride varnish application.
After the provider removes the gauze and fluoride varnish, the remaining items in the kit
are given to the child or parent to take home. The kit contains the following items:
• Single dose of fluoride varnish
• Gauze pads
• Instructions and informational material
• Toothbrushes
• Education card for parents
• Taxpayer program card
• A zip lock bag to hold the items
Company represents that “fluoride varnish requires prescriptive authority and must be
applied in a medical or dental office” and that fluoride varnish can be purchased from
Company independent from kits.
Structure of Analysis
To determine whether Company’s transactions are exempt from sales and use tax, the
Department will examine the following question:
1. Is the sale of kits and fluoride varnish exempt pursuant to §§ 39-26-717(1)(a) and (3),
C.R.S.?
Discussion
Colorado levies sales or use tax on the sale or use of tangible personal property.1
However, Colorado exempts from these taxes a variety of medical products. Among
those items exempted are prescription drugs dispensed in accordance with a prescription
by a licensed provider or materials furnished by a licensed provider as part of professional
services provided to a patient.2 Licensed providers are defined as any person authorized
to prescribe drugs under the provisions of title 12, C.R.S.
The Food and Drug Administration does not classify fluoride varnish as a drug but, rather,
as a class II medical device.3 Therefore, neither the kit nor fluoride varnish qualify under
the exemption for drugs dispensed pursuant to a prescription.
However, Colorado also exempts materials furnished by a licensed provider as part of
professional services provided to a patient.4 We assume that the medical and dental staff
referenced in your letter are either licensed providers or acting under the supervision of a
licensed provider in accordance with state law. Given this assumption, the fluoride varnish
and the other items in the kit appear to be materials furnished by licensed providers in
connection with providing professional services to patients and, therefore, would be
exempt.
1

§ 39-26-104 and 202, C.R.S.
§§ 39-26-717(1)(a) and (k), C.R.S.
3
See, United States Code of Federal Regulations, 21 CFR 872.3260.
4
§ 39-26-717, C.R.S. Licensed providers are those that are authorized under title 12, C.R.S. to
prescribe drugs. Among those that are “licensed providers” are dentists and dental hygienist.
See, §12-35-128(1)(a)(II)(C),C.R.S. (hygienist are authorized to apply fluoride varnish under the
direction of a dentist).
2

2

DR 4010A (06/11/14)

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 homerule 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/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

3

DR 4010A (06/11/14)