Is a copper-bearing IUD an exempt drug, or medical equipment, for NY sales tax?

Plain-English summary

The petitioner supplies drugs, medical equipment, and supplies. It asked whether a copper-bearing intrauterine contraceptive device (a T-shaped plastic device wrapped in copper wire, physician-inserted, releasing copper ions toxic to sperm) is an exempt drug under Tax Law 1115(a)(3).

The exemption has two relevant branches:
- Drugs and medicines intended to cure, mitigate, treat, or prevent illness are exempt (to anyone).
- Medical equipment is exempt when purchased by patients, but taxable when purchased at retail by medical providers for use in performing services for compensation.

The Office of Counsel concluded the device is medical equipment, not a drug:

• Not a drug under the NY definition. The regulation (20 NYCRR 528.4(b)(1)) defines drugs/medicines as articles recognized as drugs or medicines in the U.S. Pharmacopeia, Homeopathic Pharmacopeia, or National Formulary. The petitioner offered no evidence the copper IUD is recognized as a drug in the Pharmacopeia.
• FDA classification doesn't control. That the FDA classifies the product as a "drug" with active ingredient copper does not make it a drug for New York sales tax; the NY definition doesn't turn on FDA treatment. Exemptions are construed narrowly against the taxpayer.
• The regulations call IUDs medical equipment. 20 NYCRR 528.4(e), Example 4, and the Department's publications specifically treat intrauterine devices as medical equipment. This follows the Department's prior opinion on the same product (TSB-A-09(13)S).
• Contrast Mirena. A levonorgestrel-releasing IUD (Mirena) is an exempt drug because it is recognized as a drug in the U.S. Pharmacopeia (TSB-A-10(9)S). The copper IUD is not.

Result: exempt when sold to patients; taxable when sold to medical services providers.

What this means for you

Medical-device suppliers and pharmacies

Classification controls who pays tax. Medical equipment (like a copper IUD) is exempt only on sale to the patient; sales to physicians, clinics, or other providers buying it to perform services are taxable. By contrast, true drugs and medicines are exempt to everyone. The dividing line is whether the item is recognized as a drug in the U.S. Pharmacopeia (or the other listed compendia) -- not how the FDA labels it.

Providers and patients

A patient buying the device pays no sales tax; a provider buying it to insert for compensation generally pays tax on the purchase. Two nearly identical products (a copper IUD vs. a hormone-releasing IUD) can land on opposite sides of the line based on Pharmacopeia recognition.

Common questions

Q: The FDA calls it a drug -- isn't it a drug for sales tax too?
A: No. New York's definition turns on recognition in the U.S. Pharmacopeia (or Homeopathic Pharmacopeia / National Formulary), not on FDA classification.

Q: Who pays tax on a copper IUD?
A: As medical equipment, it's exempt when sold to the patient and taxable when sold to a medical provider buying it to perform services for compensation.

Q: Why was Mirena treated as an exempt drug but this device wasn't?
A: Mirena (a levonorgestrel IUD) is recognized as a drug in the U.S. Pharmacopeia, so it qualifies as an exempt drug. The copper IUD isn't recognized there, so it's medical equipment.

Citations and references

• Tax Law section 1115(a)(3) (exemption for drugs and medicines; medical equipment exempt to patients, taxable to providers)
• 20 NYCRR section 528.4(b)(1) (definition of drugs and medicines)
• 20 NYCRR section 528.4(e), Example 4 (intrauterine devices are medical equipment)
• TSB-A-09(13)S (prior opinion: copper IUD is medical equipment)
• TSB-A-10(9)S (Mirena levonorgestrel IUD is an exempt drug)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_55s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(55)S
Sales Tax
November 1, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S100514A

On May 14, 2010, the Department of Taxation and Finance received a Petition for Advisory Opinion
from name and address. Petitioner asks whether its sales of name redacted (“Product”) qualify for exemption
from sales tax as drugs and medicines under Tax Law §1115(a)(3).
We conclude that Product is medical equipment for purposes of Tax Law §1115(a)(3). Accordingly,
the sale of Product to patients is exempt from sales tax, but its sale to medical providers is not.
Facts
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner supplies drugs, medicines, medical equipment, and supplies to medical services providers
and patients. Among the items that Petitioner sells is Product. Because a physician’s order is required for
the purchase of the product, sales to both medical services providers and patients are shipped to physicians or
medical facilities.
Petitioner represents that Product is a plastic T-shaped device that is wrapped in copper wire.
Product’s packaging has a federal warning label that restricts it to sale by or on the order of a physician.
Product is inserted by a physician into the uterus of the patient. Product may remain implanted in the
woman’s uterus for up to 12 years. The function of the “copper-bearing” contraceptive device is to kill the
sperm. It releases copper ions, and copper is toxic to sperm. The copper-bearing contraceptive device
interferes with fertilization and makes the uterus a “spermicidal environment.” The copper adds to the
effectiveness of the contraceptive device in other ways. It affects the lining of the uterus by not allowing an
egg to implant. It also stimulates the production of prostaglandins, which are chemicals that affect the
hormones needed to support a pregnancy.
The U.S. Food and Drug Administration (FDA) classifies Product as a drug with an active ingredient
of copper. The FDA listing indicates that the “Dosage Form/Route” for Product is an intrauterine device.
Product is listed in the Physician’s Desk Reference, and copper is listed in the U.S. Pharmacopeia.
Analysis
Drugs and medicines intended for use in the cure, mitigation, treatment, or prevention of illnesses or
diseases in human beings are exempt from sales and use tax. Medical equipment and supplies required for
such use or to correct or alleviate physical incapacity are exempt if purchased by patients, but are taxable if
purchased at retail for use in performing medical and similar services for compensation. Tax Law
§1115(a)(3).
The Tax Department previously concluded in an advisory opinion that Product is medical equipment.
Accordingly, sales of Product to patients are exempt from sales tax, and sales to medical services providers
are taxable. See Adv Op Comm T&F, March 9, 2009, TSB-A-09(13)S. It had been represented in that case

-2-

TSB-A-10(55)S
Sales Tax
November 1, 2010

that the FDA classified Product as a device. The facts submitted by Petitioner in the present matter indicate
that the FDA classifies Product as a drug. Petitioner has not presented any evidence, however, that Product
is recognized as a drug or medicine in the U.S. Pharmacopeia.
The FDA classification of Product does not affect the sales tax treatment of Product under Tax Law
§1115(a)(3). Statutory exemptions are construed narrowly against the taxpayer. See Allied New York
Services, Inc. v Tully (3d Dept 1981) 83 AD2d 727, 728. Sales tax regulation section 528.4(b)(1) defines
“drugs and medicines” as (i) articles, whether or not a prescription is required for purchase, which are
recognized as drugs or medicines in the United States Pharmacopeia, Homeopathic Pharmacopeia of the
United States, or National Formulary, and intended for use in the diagnosis, cure, mitigation, treatment or
prevention of disease in humans; and (ii) articles (other than food) intended to affect the structure or any
function of the human body. The definition of “drugs and medicines” in the Sales and Use Tax Regulations
does not make the FDA’s treatment of an article a determinant of whether the article qualifies as a drug or
medicine. Further, those regulations specifically treat intrauterine devices as medical equipment for purposes
of section 1115(a)(3). See 20 NYCRR §528.4(e), Example 4. The Tax Department’s publications have
followed that rule. See Publication 822, Taxable Status of Medical Equipment and Supplies, Prosthetic
Devices, and Related Items (6/01); Publication 840, Guide To Sales Tax For Drugstores and Pharmacies
(8/98), pp. 11, 29.
The Tax Department concluded in TSB-A-10(9)S, Adv Op Comm T&F, March 8, 2010, that Mirena,
a levonorgestrel-releasing intrauterine system, is an exempt drug for purposes of Tax Law §1115(a)(3).
Unlike Product however, Mirena is recognized as a drug in the U.S. Pharmacopeia.
Based on the Tax Department’s published treatment of IUDs in our regulations and publications and
the fact that Product has not been recognized as a drug or medicine in the United States Pharmacopeia,
Homeopathic Pharmacopeia of theUnitedStates, or National Formulary, we conclude that Product is medical
equipment. Accordingly, sales of Product are exempt upon sale to patients, but taxable when sold to medical
services providers.

DATED: November 1, 2010

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth
therein and is binding on the Department only with respect to the person or entity to whom it is
issued and only if the person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department policies in effect as of the date
the Opinion is issued or for the specific time period at issue in the Opinion.