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

Plain-English summary

A supplier asked about Colorado sales tax on orthodontic materials and components. The Department described different rules for medical materials furnished to a patient, materials purchased for resale, non-medical materials, and materials consumed by the orthodontist. It expressly made no specific determination.

The letter says medical materials furnished by a licensed provider as part of professional services may qualify when furnished to the patient and when they leave the facility with, or are consumed by, the patient. It separately describes resale rules for nonprescription and non-medical materials and says provider-consumed materials are not exempt under the discussed provisions.

The GIL does not determine that braces, brackets, or any other particular product qualifies. Each product and transaction must satisfy the applicable conditions.

What this means for you

The letter supplies a framework based on end use and resale terms. It does not decide the tax treatment of the company's orthodontic products or state that braces and brackets are exempt in every sale.

Common questions

Q: Does this letter decide that braces and brackets are exempt?
A: No. It states general conditions for patient-furnished medical materials and expressly makes no specific determination about the products.

Q: What happens when the orthodontist consumes the material?
A: The letter says materials consumed by the licensed provider are not exempt under the discussed medical-materials rule and that the supplier must collect sales tax in those cases.

Q: When can a provider purchase materials for resale?
A: The letter describes separate conditions for nonprescription and non-medical materials, including when tax is collected on resale and, for non-medical materials, when the item is separately stated. The GIL does not apply those conditions to a particular product.

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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DR 4010A (06/11/14)