Are radiopharmaceuticals and contrast media used for diagnostic or therapeutic purposes taxed at Illinois's reduced 1% drug rate or the general 6.25% rate?

Plain-English summary

A tax analyst asked the Illinois Department of Revenue whether radiopharmaceuticals and contrast media used for diagnostic imaging are taxed differently than the same types of products used for therapeutic purposes. Illinois taxes qualifying food, drugs, and medical appliances at a reduced 1% state rate, compared with the general 6.25% merchandise rate that applies to most tangible personal property. The question was whether these specific medical imaging products fall into the low-rate "drug" category.

The Department explained that a product only counts as a "drug" under 86 Ill. Adm. Code 130.311 if it purports on its label to have medicinal qualities — that is, if the label makes a written claim that the product is intended to cure or treat disease, illness, injury, or pain, or to mitigate the symptoms of such disease, illness, injury, or pain. Products used purely for diagnostic purposes, by contrast, don't carry that kind of medicinal claim.

Based on the limited facts provided, the Department concluded that radiopharmaceuticals and contrast media used for diagnostic purposes do not have medicinal qualities and don't qualify for the 1% rate — they're taxed at the general 6.25% rate. Therapeutic radiopharmaceuticals are a different story: to the extent they're intended to cure, treat, or mitigate disease, illness, injury, or pain, they can qualify for the reduced 1% rate. However, the Department was clear that contrast media used in a therapeutic context still would not qualify for the low rate, even when paired with a qualifying therapeutic radiopharmaceutical.

The letter also recaps the broader regulatory framework: qualifying drugs and medicines are taxed at 1% plus applicable local taxes, while grooming and hygiene products (soaps, shampoo, toothpaste, and similar items) are excluded from the low rate even if they carry medicinal claims, unless available by prescription only. Medical appliances that directly substitute for a malfunctioning body part — such as artificial limbs, wheelchairs, pacemakers, dialysis machines, hearing aids, and eyeglasses — separately qualify for the reduced rate.

What this means for you

Sellers and distributors of diagnostic imaging products

If you sell radiopharmaceuticals or contrast media marketed strictly for diagnostic imaging, this letter indicates the Department views them as lacking medicinal qualities, meaning they should be taxed at the general 6.25% merchandise rate (plus applicable local taxes), not the reduced 1% drug rate.

Sellers of therapeutic radiopharmaceuticals

If your product is a radiopharmaceutical intended to cure, treat, or mitigate disease, illness, injury, or pain, it may qualify for the reduced 1% rate — but you'll need to be able to show that therapeutic, medicinal intent (for example, through labeling or prescribing information). Any contrast media used alongside it does not get the same treatment and stays taxable at the general rate.

Accountants and tax professionals advising clients on medical product taxability

Because this is a GIL rather than a PLR, it isn't binding on the Department and doesn't resolve taxability for any specific taxpayer's exact product line. Use it as an indication of how the Department reasons about diagnostic vs. therapeutic products under 86 Ill. Adm. Code 130.311, but confirm the labeling and marketing claims for the specific product before relying on the 1% rate, and consider requesting a binding Private Letter Ruling under 2 Ill. Adm. Code 1200.110 for a specific fact pattern.

Common questions

Q: Why are diagnostic radiopharmaceuticals and contrast media taxed at the higher rate?
A: Under 86 Ill. Adm. Code 130.311, a "drug" is a product that purports on its label to have medicinal qualities — i.e., a claim that it cures, treats, or mitigates disease, illness, injury, or pain. The Department found that products used purely for diagnostic imaging don't carry that kind of medicinal claim, so they don't qualify for the reduced 1% rate.

Q: Can therapeutic radiopharmaceuticals ever qualify for the 1% rate?
A: Yes. To the extent a therapeutic radiopharmaceutical is intended to cure, treat, or mitigate disease, illness, injury, or pain, it can qualify for the 1% rate under 35 ILCS 115/3-10 and 86 Ill. Adm. Code 130.311.

Q: Does contrast media ever qualify for the reduced rate, even in a therapeutic setting?
A: No. The letter states that contrast media used alongside therapeutic radiopharmaceuticals would not qualify for the low rate under these circumstances.

Q: Is this letter binding on the Department?
A: No. It's a General Information Letter (GIL), which under 2 Ill. Adm. Code 1200.120 merely directs the taxpayer to relevant regulations and is not a statement of Department policy. Only a Private Letter Ruling (PLR), obtained under 2 Ill. Adm. Code 1200.110, is binding, and only as to the specific taxpayer and facts presented.

Q: What other products are taxed at the reduced 1% rate?
A: Qualifying prescription and nonprescription medicines and drugs, certain Class III medical devices used for cancer treatment (plus related accessories and components), vehicle modifications for people with disabilities, and insulin, blood sugar testing materials, syringes, and needles used by human diabetics, along with medical appliances that directly substitute for a malfunctioning body part (artificial limbs, dental prostheses, orthodontic braces, crutches, orthopedic braces, wheelchairs, pacemakers, dialysis machines, hearing aids, eyeglasses, and contact lenses).

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act - imposition of tax)
• 35 ILCS 105/3 (Use Tax Act - imposition of tax)
• 35 ILCS 115/3-10 (reduced 1% rate for qualifying food, drugs, and medical appliances)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax - nature of tax)
• 86 Ill. Adm. Code 130.311 (Drugs, Medicines, Medical Appliances, and Grooming and Hygiene Products)
• 86 Ill. Adm. Code 150.101 (Use Tax - nature of tax)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0026-GIL.pdf

Original ruling text

ST 24-0026-GIL 08/06/2024 FOOD, DRUGS, & MEDICAL APPLIANCES

Code

This letter discusses radiopharmaceuticals and contrast media. 86 Ill. Adm.
130.311. (This is a GIL.)

August 6, 2024
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your email dated July 22, 2024, in which you
requested 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 https://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:
Greetings,
My name is NAME, and I’m a tax analyst at COMPANY. I track and maintain
taxability setup for various clients. I am currently reviewing the taxability of two
radiopharmaceutical products in Illinois, and I have questions regarding their
taxability.
The two products and their definitions are:
•

Radiopharmaceuticals and contrast media (Diagnostic Purposes) Radiopharmaceuticals and contrast media (Diagnostic Purposes) are
radioactive compounds used for diagnostic purposes. Contrast media
are substances used to enhance the contrast of structures or fluids within
the body in medical imaging Prescribed by a licensed physician.

COMPANY/NAME
Page 2
August 6, 2024

•

Radiopharmaceuticals and contrast media (Therapeutic Purposes) Radiopharmaceuticals and contrast media (Therapeutic Purposes) are
radioactive compounds used for therapeutic purposes. Contrast media
are substances used to enhance the contrast of structures or fluids within
the body in medical imaging Prescribed by a licensed physician.

Is there a difference in taxability for medical products used for diagnostic vs.
therapeutic purposes in Illinois?
Per 35 ILCS 115/3-10 and 86 Ill. Adm. Code 130.311, “qualifying food, drugs,
and medical appliances are taxed at a lower rate of 1% than general
merchandise which is taxed at 6.25%.” The tax shall also be imposed at the rate
of 1% on prescription and nonprescription medicines, drugs, medical appliances,
products classified as Class III medical devices by the United States Food and
Drug Administration that are used for cancer treatment pursuant to a prescription,
as well as any accessories and components related to those devices,
modifications to a motor vehicle for the purpose of rendering it usable by a
person with a disability, and insulin, blood sugar testing materials, syringes, and
needles used by human diabetics.
According to 86 Ill. Adm. Code 130.311(c), Medicines and Drugs are defined as
any pill, powder, potion, salve, or other preparation for human use that purports
on the label to have medicinal qualities. A written claim on the label that a
product is intended to cure or treat disease, illness, injury, or pain or to mitigate
the symptoms of such disease, illness, injury, or pain constitutes a medicinal
claim.
Could you please confirm whether either of the two products mentioned
would qualifies [sic] as a “drug” and are taxable at the reduced sales tax
rate? If the products do not fall under the statute mentioned above, could
you please point me to the applicable statutory language that would
confirm their taxability?
Thank you and please let me know if you have any further questions!
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged
in this State in the business of selling tangible personal property to purchasers for use
or consumption. 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property

COMPANY/NAME
Page 3
August 6, 2024
that is purchased anywhere at retail from a retailer. 35 ILCS 105/3; 86 Ill. Adm. Code
150.101.
Please see the Department’s regulation at 86 Ill. Adm. Code Section 130.311,
which is its regulation governing Drugs, Medicines, Medical Appliances, and Grooming
and Hygiene Products. Those products that qualify as drugs, medicines and medical
appliances are taxed at a lower State rate of 1% plus any applicable local taxes. Those
items that do not qualify for the low rate of tax are taxed at the general merchandise
rate of 6.25% plus applicable local taxes.
A medicine or drug is any pill, powder, potion, salve, or other preparation for
human use that purports on the label to have medicinal qualities. A written claim on the
label that a product is intended to cure or treat disease, illness, injury, or pain, or to
mitigate the symptoms of such disease, illness, injury, or pain constitutes a medicinal
claim. See Section 130.311 for examples of medicinal claims. Examples of qualifying
products include prescription drugs or medicines and nonprescription drugs or
medicines such as aspirin or other pain relievers that purport on the label to have
medicinal qualities. The term “nonprescription medicines and drugs” does not include
grooming and hygiene products. Grooming and hygiene products include, but are not
limited to, soaps and cleaning solutions, shampoo, toothpaste, mouthwash,
antiperspirants, and suntan lotions and screens, unless those products are available by
prescription only. If an item is a nonprescription grooming and hygiene product, it will
be taxed at the State 6.25% general merchandise rate regardless of any medicinal
claims made on the product’s label.
A medical appliance is an item that is used to directly substitute for a
malfunctioning part of the human body. Included in the exemption as medical
appliances are such items as artificial limbs, dental prostheses and orthodontic braces,
crutches and orthopedic braces, wheelchairs, heart pacemakers, and dialysis machines
(including the dialyzer).
Corrective medical appliances such as hearing aids,
eyeglasses, and contact lenses qualify for exemption. Moreover, generally, home
glucose monitors, test strips, and related supplies.
From the limited information you have provided it appears that
radiopharmaceuticals and contrast media used for diagnostic purposes do not have any
medicinal qualities and would not qualify for the 1% rate.
You do not describe the therapeutic benefits of radiopharmaceuticals. However,
to the extent therapeutic radiopharmaceuticals are intended to cure or treat disease,
illness, injury, or pain, or to mitigate the symptoms of such disease, illness, injury, or
pain, they would qualify for the 1% rate. The contrast media under these circumstances
would not qualify for the low rate.

COMPANY/NAME
Page 4
August 6, 2024
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,
Richard S. Wolters
Associate Counsel
RSW:slc