Is a copper-coated IUD taxable, or exempt as a drug or medicine like birth control pills?

Plain-English summary

This opinion corrects an earlier 2010 ruling (TSB-A-10(55)S) about a copper-coated intra-uterine device (IUD). The Petitioner supplies drugs, medicines, and medical devices; the IUD is a plastic T-shaped device wrapped in copper wire, sold only on a physician's order and inserted by a physician (it can stay implanted up to 12 years). It works as a contraceptive drug: the copper releases ions toxic to sperm, creating a "spermicidal environment," preventing fertilization and implantation. The FDA classifies it as a drug with an active ingredient of copper; it's in the Physician's Desk Reference, and copper is listed in the U.S. Pharmacopeia. The Petitioner asked (and the Department agreed) to correct the prior opinion to treat the device as an exempt drug.

The Office of Counsel concluded the IUD is exempt as a drug or medicine under Tax Law 1115(a)(3):

• The Sales Tax Regulations treat birth control pills as qualifying for the "drugs and medicines" exemption (20 NYCRR 528.4(b)(1)(i)).
• The IUD is analogous in function to birth control pills, its main ingredient copper is listed as a drug in the U.S. Pharmacopeia, and the FDA treats it as a drug.
• Therefore it qualifies as a drug or medicine and is not subject to sales or use tax (correcting TSB-A-10(55)S).

What this means for you

Contraceptive and drug-classified devices

A product that functions as a contraceptive drug and is FDA-classified as a drug -- with an active ingredient recognized in the U.S. Pharmacopeia -- can be exempt as a drug or medicine, even though it's a physical "device" that's implanted. Function and drug classification, not the device form, drive the exemption.

The drugs-and-medicines exemption is broader than pills

New York treats birth control pills as exempt drugs, and extends that to analogous products. Look at FDA classification, Pharmacopeia listing, and mechanism of action to assess whether a borderline product is an exempt drug/medicine.

Opinions can be corrected -- watch for modifications

This page reflects a modification of a prior opinion. When the Department revisits a ruling, the later opinion controls for the taxpayer it was issued to.

Common questions

Q: Is a copper IUD taxable in New York?
A: No. It's exempt as a drug or medicine -- it functions like a contraceptive drug, the FDA classifies it as a drug, and copper is a recognized drug ingredient.

Q: Why is a "device" treated as a drug?
A: Because its active ingredient (copper) works pharmacologically as a contraceptive, the FDA classifies it as a drug, and it's analogous to exempt birth control pills.

Q: Didn't an earlier opinion say otherwise?
A: Yes -- this opinion corrects TSB-A-10(55)S to provide that the device qualifies as an exempt drug or medicine.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1115(a)(3) (exemption for drugs and medicines)
• 20 NYCRR section 528.4(b)(1)(i) (drugs and medicines)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_8s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-14(8)S
Sales Tax
February 11, 2014

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

PETITION NO. S130520A

This modifies an Advisory Opinion issued to Petitioner Redacted Redacted Redacted,
dated November 1, 2010 (TSB-A-10(55)S) regarding the taxability of Petitioner’s product, a
copper-coated intra-uterine device (IUD), hereafter referred to as “Product.” The purpose of this
modification is to correct the original opinion to provide that the Product qualifies as a drug or
medicine and is thus not subject to sales and use tax.
Facts
Petitioner Redacted Redacted Redacted supplies drugs, medicines, medical equipment,
and supplies to medical services providers and patients. Among the items that Petitioner
manufactures and sells is Product. Because a physician’s order is required for the purchase of
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 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
Tax Law § 1105(a) imposes sales and use tax on the retail sale of tangible personal
property. The Sales Tax Regulations treat "birth control pills" as qualifying for the "drugs and
medicines" exemption in section 1115(a)(3). Product is analogous in function to birth control
pills, its main ingredient, copper, is listed as a drug in the U.S. Pharmacopeia, and Product is

-2-

TSB-A-14(8)S
Sales Tax
February 11, 2014

treated as a drug by the Federal Food and Drug Administration. Accordingly, Product qualifies
as a drug or medicine and is thus not subject sales and use tax. See Tax Law § 1115[a][3]; 20
NYCRR § 528.4[b][1][i]; TSB-A-10[9]S).

DATED: February 11, 2014

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.