Are sales of the Mirena intrauterine contraceptive to healthcare providers exempt from New York sales tax?

Plain-English summary

A company sells Mirena -- a levonorgestrel-releasing intrauterine system used for contraception and to treat heavy menstrual bleeding -- to healthcare providers, who prescribe and insert it. Unlike a copper IUD (which uses a copper wire to release copper ions and contains no drug), Mirena holds a reservoir of the hormone levonorgestrel that is gradually released into the body. The company asked whether its sales of Mirena are subject to sales tax.

The Office of Counsel concluded Mirena is a DRUG under Tax Law 1115(a)(3), so its sales are EXEMPT.

• The exemption covers drugs and medicines. Tax Law 1115(a)(3) exempts drugs and medicines for the cure, mitigation, treatment, or prevention of illness in humans. The regulation (20 NYCRR 528.4(b)) defines "drugs and medicines" to include articles recognized in the U.S. Pharmacopeia and intended to treat disease, plus articles (other than food) intended to affect the structure or function of the body. The base/vehicle and delivery medium don't change the exempt status.
• Mirena qualifies. Both Mirena and levonorgestrel are recognized as drugs in the U.S. Pharmacopeia; Mirena is FDA-approved as a drug and listed in the Physicians' Desk Reference; and the hormone works by chemical action to prevent pregnancy, performing the same function as oral contraceptives. So Mirena is a drug for 1115(a)(3), and the company's sales to providers are exempt.
• Why this differs from a copper IUD. The copper IUD Paragard (TSB-A-09(13)S) is classified by the FDA as a medical device, not a drug, and is not listed in the Pharmacopeia. The sales-tax regulation's statement that an IUD is "medical equipment" (528.4(e), Example 4) does not extend to a device that contains a drug recognized in the Pharmacopeia. The federal definitions reinforce the line: a "device" (21 U.S.C. 321(h)) does not achieve its primary purpose through chemical action in the body, whereas a "drug" (321(g)) does.

What this means for you

Pharmaceutical and medical-product sellers

Whether a contraceptive or similar product is an exempt drug or taxable/medical-equipment item turns on its regulatory classification, not on its general category. Look to whether the product is recognized in the U.S. Pharmacopeia (or Homeopathic Pharmacopeia / National Formulary) and how the FDA classifies it (drug vs. device). A product that works by chemical action and is listed as a drug is exempt under 1115(a)(3); a comparable product classified as a device is treated as medical equipment.

Healthcare providers

A product that is an exempt drug is exempt when you buy it. By contrast, medical equipment and supplies (other than drugs/medicines) purchased for use in performing medical services for compensation are taxable -- so the drug-vs-device classification can change your purchase tax.

Common questions

Q: It's an IUD -- isn't every IUD just "medical equipment"?
A: No. A copper IUD that contains no drug is medical equipment (and the IUD example in 528.4(e) refers to that). Mirena releases a hormone that is a recognized drug, so it's treated as an exempt drug instead.

Q: Does FDA approval as a "drug" control the New York result?
A: It's highly significant. New York's definition of drugs/medicines closely tracks the federal definition, so the FDA's classification of Mirena as a drug -- and its listing in the U.S. Pharmacopeia -- drives the exempt result.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1115(a)(3) (exemption for drugs, medicines, medical equipment and supplies)
• 20 NYCRR 528.4(b) (definition of drugs and medicines); 20 NYCRR 528.4(e) (IUD as medical equipment, Example 4)
• 21 U.S.C. 321(g)(1) (federal definition of 'drug'); 21 U.S.C. 321(h) (federal definition of 'device')
• TSB-A-09(13)S (Paragard copper IUD = medical device, not a 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_9s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(9)S
Sales Tax
March 8, 2010

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

PETITION NO. S091207A

On December 7, 2009, the Department of Taxation and Finance received a Petition for Advisory
Opinion from name and address redacted. Petitioner asks whether Mirena, a product it sells to healthcare
providers, is subject to sales tax. Mirena is a drug for purposes of Tax Law section 1115(a)(3).
Therefore, petitioner’s receipts from its sale are exempt from sales and use tax.
Facts
Petitioner sells Mirena to healthcare providers, who in turn prescribe it and insert it in their
patients. Mirena is a levonorgestrel-releasing intrauterine system indicated for intrauterine contraception
(birth control) and/or the treatment of menorrhagia (heavy menstrual bleeding).
Levonorgestrel is a synthetic progestogen used as an active ingredient in some hormonal
contraceptives. Unlike an IUD, which does not contain a drug, but uses a copper wire to release copper
ions, Mirena contains a reservoir of the hormone levonorgestrel, which is released gradually into the
patient’s uterus. Mirena is approved by the federal Food and Drug Administration (FDA) as a drug. Both
Mirena and levonorgestrel are recognized as drugs in the United States Pharmacopeia. Mirena is also
listed as a drug in the Physician’s Desk Reference.
The hormone levonorgestrel prevents pregnancy. Mirena performs the same function as pill or
capsule contraceptives. Mirena may not be purchased by a non-practitioner. It can be obtained only by
prescription and must be placed into a patient by a healthcare provider. Ultimately, the objective of the
patient and healthcare provider is to obtain a measured and controlled release of levonorgestrel into the
patient’s body.
Analysis
Section 1105(a) of the Tax Law imposes sales tax on the sale of tangible personal property.
Section 1115(a)(3) of the Tax Law exempts from sales and use tax drugs and medicines intended for use,
internally or externally, in the cure, mitigation, treatment or prevention of illnesses or diseases in human
beings, medical equipment (including component parts thereof) and supplies required for such use or to
correct or alleviate physical incapacity, and products consumed by humans for the preservation of health,
but not including cosmetics or toilet articles notwithstanding the presence of medicinal ingredients
therein. Medical equipment (including component parts thereof) and supplies, other than drugs and
medicines, purchased at retail for use in performing medical and similar services for compensation are
subject to tax.
Sales tax regulation section 528.4(b) 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

-2­

TSB-A-10(9)S
Sales Tax
March 8, 2010

than food) intended to affect the structure or any function of the human body. The regulation further
provides that “[t]he base or vehicle used (oil, ointment, talc, etc.) and the medium used for delivery
(disposable wipe, syringe, saturated pad, etc.) of a drug or medicine will not affect its exempt status.” 20
NYCRR 528.4(b)(2).
Because Mirena is classified as a drug by the United States Pharmacopeia, it is a drug for
purposes of Tax Law section 1115(a)(3). This product is distinguishable from the IUD device Paragard®
addressed in TSB-A-09(13)S. Paragard was classified by the FDA as a medical device, not as a drug. It
was not listed as a drug in the United States Pharmacopeia. While the sales tax regulations provide that a
birth control device commonly known as an IUD is medical equipment (example 4 in 20 NYCRR
528.4(e]), this regulation does not encompass a device that contains a drug as classified by the United
States Pharmacopeia.
Federal drug statutes address the distinction between drugs and devices. Section 321(g)(1) of
Title 21 of the U.S. Code defines the term “drugs” as “(A) articles recognized in the official United States
Pharmacopeia, official Homeopathic Pharmacopeia of the United States, or official National Formulary,
or any supplement to any of them; and (B) articles intended for use in the diagnosis, cure, mitigation,
treatment, or prevention of disease in man or other animals; and (C) articles (other than food) intended to
affect the structure or any function of the body of man or other animals; and (D) articles intended for use
as a component of any article specified in clause (A), (B), or (C).” Section 321(h) of Title 21 defines the
term “device.” A component of this definition is that the product “does not achieve its primary intended
purposes through chemical action within or on the body of man or other animals and which is not
dependent upon being metabolized for the achievement of its primary intended purposes.” Thus, because
the sales tax definition of drugs and medicines is similar to the federal definition, it is highly significant
that the FDA recognizes Mirena as a drug. Accordingly, Mirena should be classified as a drug for
purposes of sales tax.
Because Mirena is a drug for purposes of Tax Law section 1115(a)(3), petitioner’s sales of
Mirena to healthcare providers are exempt from sales tax.

DATED: March 8, 2010

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of 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.