Did nonprescription durable medical equipment receive Illinois's reduced medical-appliance tax rate?

Plain-English summary

A national sales-tax filing firm asked how Illinois taxed nonprescription durable medical equipment not intended for home use.

IDOR said the medical-appliance test was whether the item directly substituted for a malfunctioning part of the human body. The item could be prescribed, bought by a health professional for patient use, or bought directly by an individual, but prescription or professional use did not by itself qualify it.

Examples of qualifying appliances included artificial limbs, dental prostheses, orthodontic and orthopedic braces, crutches, wheelchairs, pacemakers, dialysis machines, hearing aids, eyeglasses, and contact lenses.

Diagnostic, treatment, and rehabilitative equipment generally did not qualify because it did not directly substitute for a malfunctioning body part. Under the 2015 rates described, qualifying medical appliances were taxed at the 1% State rate plus applicable local taxes, while nonqualifying items used the 6.25% general-merchandise rate plus local taxes.

What this means for you

Labels such as "durable medical equipment," nonprescription status, clinical use, or non-home use did not control. The product's function in directly replacing a lost or malfunctioning body part was the key test in this GIL.

Common questions

Did a prescription automatically produce the lower rate? No.

Did diagnostic equipment generally qualify? No.

Did wheelchairs and dialysis machines qualify? Yes, as examples listed by IDOR.

Citations and references

• 86 Ill. Adm. Code 130.311(d).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0026-gil.pdf

Original ruling text

ST 15-0026-GIL 04/30/2015 MEDICAL APPLIANCES
A medical appliance is an item that directly substitutes for a malfunctioning part of the
human body. Products that qualify as medical appliances are taxed at a lower State
rate of 1% plus any applicable local taxes. See 86 Ill. Adm. Code 130.311. (This is a
GIL.)

April 30, 2015

Dear XXXX:
This letter is in response to your letter dated February 18, 2015, 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:
COMPANY (“the company”) is a national sales tax filing firm, and is a
Certified Service Provider (“CSP”) certified under Streamlined Sales Tax
(“SST”). COMPANY calculates sales and use taxes and generates and
files tax returns in all tax jurisdictions at all levels – state, county, city, local
and special district taxes.
The company respectfully requests a ruling concerning the sales and use
tax as it should or should not be applied to non-prescription durable
medical equipment that is not for home use. If taxable, we also request a
decision of the tax rate to be applied to this transaction.
We are currently relying on Illinois regulation §86ILAC130.311 to
determine the taxability of the non-prescription durable medical equipment
that is not for home use.
Regulations and Rules

86ILAC130311(d) Medical Appliances: A medical appliance is an item
that is used to directly substitute for a malfunctioning part of the human
body.
86ILAC130.311(d)(1) For purposes of this Section, an item that becomes
part of the human body by substituting for any part of the body that is lost
or diminished because of congenital defects, trauma, infection, tumors or
disease is considered a medical appliance.
Examples of medical
appliances that will qualify the product for the low rate of tax include, but
are not limited to:
86ILAC130.311 (d)(1)(A) breast implants that restore breasts after loss
due to cancer;
86ILAC1303.311(d)(1)(B) heart pacemakers;
86ILAC(d)(1)(C) artificial limbs;
86ILAC130.311(d)(1)(D) dental prosthetics;
86ILAC130.311(d)(1)(E) crutches and orthopedic braces;
86ILAC130.311(d)(1)(F) dialysis machines (including the dialyzer);
86ILAC130.311(d)(1)(G) wheelchairs; and
86ILAC130.311(d)(1)(H) mastectomy forms and bras.
86ILAC130.311(d)(2) Corrective medical appliances such as hearing aids,
eyeglasses, contact lens and orthodontic braces qualify as medical
appliances subject to the low rate of tax.
86ILAC130.311(d)(4) Items transferred incident to cosmetic procedures
are not considered medical appliances. For purposes of this Section, a
cosmetic procedure means any procedure performed on an individual that
is directed at improving the individual’s appearance and that does not
prevent or treat illness or disease, promote the proper function of the body
or substitute for any part of the body that is lost or diminished because of
congenital defects, trauma, infection, tumors or disease. Cosmetic
procedures include, but are not limited to, elective breast, pectoral or
buttock augmentation.
86ILAC130.311(d)(5) Diagnostic equipment shall not be deemed to be a
medical appliance, except as provided in Section 130.311(e). Other
medical tools, devices and equipment such as x-ray machines, laboratory

equipment and surgical instruments that may be used in the treatment of
patients but that do not directly substitute for a malfunctioning part of the
human body do not qualify as medical appliances. Sometimes a kit of
items is sold where the purchaser will use the kit items to perform
treatment upon himself or herself. The kit will contain paraphernalia and
sometimes medicines. An example of a kit sold for the removal of ear wax.
Because the paraphernalia hardware is for treatment, it generally does not
qualify as a medical appliance. However, the Department will consider the
selling price of the entire kit to be taxable at the reduced rate when the
value of the medicines in the kit is more than half of the total selling price
of the kit.
86ILAC130.311(d)(6) Supplies, such as cotton swabs, disposable diapers,
toilet paper, tissues and towelettes and cosmetics, such as lipsticks,
perfume and hair tonics, do not qualify for the reduced rate.
86ILAC130.311(d)(7) Medical appliances may be prescribed by licensed
health care professionals for use by a patient, purchased by healthcare
professionals for the use of patients or purchased directly by individuals.
Purchases of medical appliances by lessors that will be leased to others
for human use also qualify for the reduced rate of tax.
Analysis & Conclusion
We apply the commonly used definition of durable medical equipment
which shall mean equipment including repair and replacement parts for
same which:
(1)

Can withstand repeated use; and

(2)

Is primarily and customarily used to serve a medical purpose; and

(3)

Generally is not useful to a person in the absence of illness or injury; and

(4)

Is not worn in or on the body.

We respectfully request the State to provide a response as to the sales tax
rate and taxability of the non-prescription durable medical equipment that
is not for home use.
DEPARTMENT’S RESPONSE:
The Department’s regulation regarding the appropriate tax rate for medical
appliances can be found at 86 Ill. Adm. Code 130.311. Products that qualify as medical
appliances are taxed at a lower State rate of 1% plus any applicable local taxes. Those

items that do not qualify for the lower rate of tax are taxed at the general merchandise
rate of 6.25% plus applicable local taxes.
A medical appliance is an item that directly substitutes for a malfunctioning part
of the human 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 reduced 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 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 130.311(d).
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:kd