Are the materials and components of orthodontic braces subject to Colorado sales tax?

Plain-English summary

A supplier asked whether the materials and components of orthodontic braces are subject to Colorado sales tax. The Department's answer sorts the supplies by where they end up — on the patient, resold to the patient, or consumed by the orthodontist:

1. Materials furnished to the patient as part of professional services → exempt. "The sale of medical materials, when furnished by a licensed provider as part of professional services provided to a patient[,] are exempt" (§ 39-26-717(1)(k)). The catch: the item "must be furnished to the patient by the provider and either leave the facility with the patient or be consumed by the patient at the medical facility" (Reg 39-26-717(1)(f)(i)(A)). The braces and brackets that go on the patient fit this.
2. A provider's purchase of nonprescription materials → exempt as a sale for resale (if tax charged on resale). A licensed provider's purchase of nonprescription materials is exempt as a sale for resale "when the licensed provider charges tax on the materials when resold to the patient," and these "are not required to be separately stated on a patient's invoice" (Reg (D)(i)).
3. Purchases of non-medical materials → resale-exempt only with two conditions. For non-medical materials, resale exemption applies "only if the tax is collected when resold to the patient and the items are separately stated on the patient's invoice" (Reg (D)(ii)).
4. Materials the provider consumes → taxable. "Sales of medical materials that will be consumed by the licensed provider are not exempt … and Company must collect sales tax for the materials sold to the Orthodontist in such cases" (Reg (D)(iii)).

So the dividing line is whether the material is passed through to the patient (exempt as furnished-in-care or as a resale) or used up by the orthodontist in providing the service (taxable to the orthodontist). This is a GIL — guidance, not a binding determination.

What this means for you

Suppliers of orthodontic and dental materials

Your tax treatment depends on how the orthodontist uses what you sell. Materials that become part of the patient or are otherwise furnished to and kept/consumed by the patient are exempt (either as medical materials furnished in care, or as a resale when the orthodontist charges the patient tax). Materials the orthodontist consumes in performing the service are taxable — collect the tax from the orthodontist. When in doubt, get resale/exemption documentation and understand the end use.

Orthodontists and dental practices

Materials you furnish to the patient (braces, brackets, items that leave with or are consumed by the patient) can be exempt or bought for resale; if you buy nonprescription materials for resale, charge the patient tax (no separate line required), while for non-medical materials you must both charge tax and separately state them. Supplies you consume yourself are taxable when you buy them.

Accountants and tax professionals

Framework under § 39-26-717: (1)(k) medical-materials-furnished-in-care exemption, conditioned by Reg 39-26-717(1)(f)(i)(A) (furnished to patient + leaves with/consumed by patient); resale tiers in Reg (D)(i) (nonprescription — resale exempt, no separate statement needed), (D)(ii) (non-medical — resale exempt only if tax collected and separately stated), and (D)(iii) (provider-consumed — taxable). "Licensed provider" per § 39-26-717(3). Compare the licensed-provider materials analysis in CO GIL 17-007 (fluoride varnish).

Common questions

Q: Are orthodontic braces taxable in Colorado?
A: Materials furnished to the patient as part of professional services — including the braces that go on the patient and leave with or are consumed by them — are exempt. The treatment differs for supplies the orthodontist consumes.

Q: When can an orthodontist buy supplies tax-free for resale?
A: A purchase of nonprescription materials is exempt as a sale for resale when the orthodontist charges the patient tax on resale (no separate line item required). For non-medical materials, the resale exemption applies only if tax is collected on resale and the items are separately stated on the patient's invoice.

Q: What supplies are taxable?
A: Materials the orthodontist consumes (rather than furnishing to the patient) aren't exempt as medical materials or as resale, so the supplier must collect sales tax on those.

Q: What's the key test?
A: Whether the item is furnished to the patient (leaves with or is consumed by the patient) — exempt or resale-exempt — versus consumed by the provider — taxable.

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 on tangible personal property)
- § 39-26-717(3), C.R.S. (definition of "licensed provider"); § 39-26-717(1)(k), C.R.S. (exemption for materials furnished by a licensed provider as part of professional services)
- 1 CCR 201-4, Reg 39-26-717(1)(f)(i)(A) (item must leave with or be consumed by the patient)
- Reg 39-26-717(1)(f)(i)(D)(i) (nonprescription materials resale-exempt; no separate statement required)
- Reg 39-26-717(1)(f)(i)(D)(ii) (non-medical materials resale-exempt only if tax collected and separately stated)
- Reg 39-26-717(1)(f)(i)(D)(iii) (provider-consumed materials are taxable)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-17-020.pdf

Original ruling text

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

GIL-17-020
December 29, 2017
XXXXXX
Attention: XXXXXX
XXXXXX
XXXXXX
Re: Taxability of Orthodontic Supplies
Dear XXXXXX,
You submitted a request for guidance on behalf of XXXXXX (“Company”) to
determine the taxability of orthodontic supplies.
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
Are materials and components of orthodontic braces subject to sales tax?

Discussion
Colorado levies sales tax on the sale of tangible personal property.1 Some
tangible personal property, such as medical materials, are exempt from sales or
use tax if they satisfy the statutory requirements for the exemption. The sale of
medical materials, when furnished by a licensed provider2 as part of professional
services provided to a patient are exempt from taxation.3 The exempt item must
be furnished to the patient by the provider and either leave the facility with the
patient or be consumed by the patient at the medical facility.4
Sales of medical materials may also be exempt as a sale for resale. Purchases by
a licensed provider of nonprescription materials are exempt as a sale for resale
when the licensed provider charges tax on the materials when resold to the
patient. These purchases are not required to be separately stated on a patients
invoice.5 Purchases of non-medical materials may also be exempt as a sale for
resale only if the tax is collected when resold to the patient and the items are
separately stated on the patient’s invoice.6
Sales of medical materials that will be consumed by the licensed provider are not
exempt as medical materials or as a sale for resale, and Company must collect
sales tax for the materials sold to the Orthodontist in such cases.7
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 homerule 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/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

1 §39-26-104 C.R.S.

2 §39-26-717(3), C.R.S.

3 §39-26-717(1)(k), C.R.S.
4 Reg 39-26-717(1)(f)(i)(A)

5 Reg 39-26-717(1)(f)(i)(D)(i)

6 Reg 39-26-717(1)(f)(i)(D)(ii)

7 Reg 39-26-717(1)(f)(i)(D)(iii)

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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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