Did an implantable vascular access port used for infusions and blood draws qualify for Illinois's reduced medical-appliance tax rate?

Plain-English summary

Illinois did not expressly say whether the implantable vascular access port qualified for the reduced rate. The port was described as providing repeated vascular access for medication and fluid infusion, nutrition, blood products, and blood-sample withdrawal.

The Department explained that a medical appliance had to be intended by its manufacturer to directly substitute for a malfunctioning body part. Prescription, implantation, or use by a physician did not automatically qualify an item. Artificial limbs, prostheses, braces, wheelchairs, pacemakers, dialysis machines, hearing aids, eyeglasses, and contact lenses were qualifying examples; diagnostic, treatment, and rehabilitation equipment generally did not qualify.

The letter stated historical state rates of 1% for qualifying medicines and medical appliances and 6.25% for other tangible property, plus applicable local taxes. It left application of the substitution test to the described port unresolved.

What this means for you

Do not treat implantation or medical necessity as conclusive. Obtain manufacturer evidence showing whether the port directly performs a malfunctioning body's function rather than serving as a treatment-access tool.

Common questions

Q: Did the Department approve the reduced rate for the port?
A: No product-specific approval appears in the GIL.

Q: Is physician use enough?
A: No. The item itself must satisfy the direct-substitution test.

Citations and references

• 86 Ill. Adm. Code 130.310 and 130.310(c)(2)
• 2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Medical Appliances

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0047.pdf

Original ruling text

ST 10-0047-GIL 05/28/2010 MEDICAL APPLIANCES
A medical appliance is defined as an item which is intended by its manufacturer for use in
directly substituting for a malfunctioning part of the body. See 86 Ill. Adm. Code 130.310(c).
(This is a GIL.)

May 28, 2010

Dear Xxxxx:
This letter is in response to your email dated May 17, 2010, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
We are a management company for a for profit surgical center operating in the state of
Illinois. We purchase the PowerPort Implantable port, which are devices implanted into
the patient. Following is a description of the product as provided by the manufacturer:
The PowerPort Implantable port is an implantable access device designed
to provide repeated access to the vascular system. The port system can
be used for infusion of medications, IV fluids, parenteral nutrition solutions,
blood products and for the withdrawal of blood samples.
We have been unable to determine what tax rate applies to this item based upon your
description of medical appliances under Title 86, Part 130, Section 130.310. We think
that if a patient needs to have this device implanted, something within the body is not
functioning properly. Please advise.

DEPARTMENT’S RESPONSE:
All gross receipts from sales of tangible personal property in Illinois are subject to Retailers’
Occupation Tax unless an exemption is specifically provided. Medicines and medical appliances are
not taxed at the normal State rate of 6.25% plus applicable local taxes. These items are taxed at a

reduced State rate of 1% plus applicable local taxes. See 86 Ill. Adm. Code 130.310. Items subject to
this lower tax rate include prescription and nonprescription medicines, drugs, medical appliances, and
insulin, urine testing materials, syringes, and needles used by diabetics, for human use.
The definition of a medical appliance is "an item which is intended by its manufacturer for use
in directly substituting for a malfunctioning part of the body." “Medical appliances” may be prescribed
by licensed health care professionals for use by a patient, purchased by health care professionals for
the use of patients, or purchased directly by individuals. See 86 Ill. Adm. Code 130.310(c)(2). Please
note that not all items prescribed by or used by physicians or other licensed health care professionals
qualify for the low rate.
Medical appliances that qualify for the reduced rate include such items as artificial limbs,
dental prostheses and orthodontic braces, crutches and orthopedic braces, wheelchairs, heart
pacemakers, and dialysis machines. Other examples of items that qualify for the reduced rate are
corrective medical appliances such as hearing aids, eyeglasses and contact lenses. As a general
proposition, diagnostic, treatment, and rehabilitative equipment items do not qualify for the reduced
rate of tax as medical appliances because such items are not "for use in directly substituting for a
malfunctioning part of the body," 86 Ill. Adm. Code 130.310(c)(2).
As you can see, in order for a medical appliance to qualify for the reduced rate, the medical
appliance itself must be used in a manner that directly substitutes for a malfunctioning part of the
body.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk