Response November 30,
1993
Request
August 13, 1994
Mr. Joe Pacheco,
Commissioner
Utah State Tax
Commission
160 East 300 South
Salt Lake City, Utah
84144
Dear Commissioner
Pacheco:
This is a request for
a written ruling regarding the scope of the exemption provided for “medicine”
in Section 59-12-104(10) of the Utah Code Annotated. The word “medicine” is
defined in UCA 59-12-102(4) (a) (I) to mean “insulin, syringes, and any
medicine prescribed for the treatment of human ailments by a person authorized
to prescribe treatments and dispensed on prescription filled by a registered
pharmacist or supplied to patients by a physician, surgeon, or podiatrist; (ii)
any medicine dispensed to patients in a county or other licensed hospital if
prescribed for that patient and dispensed by a registered pharmacist or
administered under the direction of a physician or paramedic; (iii) any oxygen
or stoma supplies.. (b) “Medicine” does not include: (I) any auditory,
prosthetic, ophthalmic, or ocular device or appliance; or (ii) any alcoholic
beverage.”
This definition has
not been modified or clarified by any rule promulgated by the Commission.
Therefore, I am seeking a ruling regarding items within areas that are neither
specifically included nor specifically excluded.
To give background,
one must refer to the common usage given to the words that are the subject of
the exemption. The word “Treatment” is defined rather broadly by Webster's New
Collegiate Dictionary “as the act or manner or an instance of treating
someone...” The word is further defined as "the techniques or actions
customarily applied in a specific situation” or “a substance or technique used
in treating..”. The dictionary defines medicine rather broadly as well, giving
the following meanings: “a substance or preparation used in treating disease”
or, “something that affects well being" or, “the science and art dealing
with the maintenance of health and the prevention, alleviation or cure of
disease...” The definitions go on, but I think you see the need for further
clarification of the scope of the exemption.
One of the areas of
concern deals with dyes and contrast materials that are used by the Xray
department of a licensed hospital. These materials are used in several
different phases of the treatment of an ailment, which, by the way, is defined
as “a bodily disorder or chronic disease” and “2: unrest, uneasiness”. The X
Rays are used as part of the treatment to verify the effectiveness of the total
effort to eradicate the disease; to verify the exact nature and extent of the
disease; and to determine the course of action to be taken in order to
eradicate the disease. The dyes are used as part of the treatment process for
the initial diagnosis, during the middle of the treatment as a treatment tool,
and at the end of the treatment as a verification that the treatment is on
course. In view of the wording of the exemption and definition, it seems to me
that the answer must be yes, these dyes and contrast materials are exempt,
especially since the code contains no specific exclusion.
There is an analogy to
this situation in the tax commission's treatment of auto repairs and the taxes
due upon making such repairs. The first process consists of identifying the
problem, usually through the use of diagnostic equipment. The same diagnostic
equipment is used throughout the repair process, and confirms that the problem
has been corrected at the end of the repair. The sales tax applies to the
charges for the diagnostic services throughout the repair process, even though
the charges for diagnostic services do not constitute charges for the repair of
tangible personal property.
The second area of
concern is somewhat different, but again, in view of the definitions involved,
there is a strong probability that these items would qualify. The area deals
with appliances, such as pace-makers, sutures, bone cement and similar
substances used to treat ailments either medicinally or surgically. Nowhere are
these items specifically excluded from the exemption. They are not prosthetic
devices, inasmuch as they do not replace a body part. They do qualify as “a
substance used in treating disease” since substance is defined as a physical
material which has a discreet existence.
I will appreciate your
confirmation that the dyes and contrast drugs and the appliances and substances
other than prosthetic devices are exempt from sales tax as a medicine.
Thank you for your
time and consideration in providing confirmation and favorable answers to this
request. Your prompt response will be appreciated.
Sincerely yours,
XXXXX
November 30, 1993
XXXXX
Re: Advisory Opinion -
- Sales Tax
Exemption of Prescribed Medicine
Dear XXXXX:
Your request for an
advisory opinion as to whether purchases of dyes and contrast materials used in
hospital X-ray activities and appliances such as pace-makers, sutures, bone
cement and similar substances qualify for sales or use tax exemption was
referred to the Auditing Division for their analysis.
The division's staff recommendations are
as follows:
1. The statute, Utah Code Annotated Section
59-12-104(10) exempts from the sales and use tax “sales of medicine.” U.C.A.
Section 59-12-102(4) defines “medicine” as:
I) insulin, syringes, and any medicine
prescribed for the treatment of human ailments by a person authorized to
prescribe treatments and dispensed on prescription filled by a registered
pharmacist, or supplied to patients by a physician, surgeon, or podiatrist;
(ii)
any medicine dispensed to patients in a county or other licensed hospital if
prescribed for that patient and dispensed by a registered pharmacist or
administered under the direction of a physician; and
(iii)
any oxygen or stoma supplies prescribed by a physician or administered under
the direction of a physician or paramedic.
(b)
“Medicine” does not include:
(I)
any auditory, prosthetic, ophthalmic, or ocular device or appliance; or
(ii) any alcoholic beverage.
2. The courts have indicated that
exemptions are to be narrowly construed. The exemptions must be viewed with
regard to specifics defined as exempt, not with the view that items are exempt
“since the code contains no specific exclusion” from the exemption as the
opinion request concludes.
3. With regard to the specific items that
are the subject of this opinion, dyes and contrast materials used in X-ray
functions; appliances such as pace-makers, sutures, bone cement, and similar
substances are not medicines for purposes of the exemption.
Based upon the facts presented in your
letter, we are in agreement with the Auditing Division's recommendations.
Obviously, if there are deviations from these facts, this opinion may be
negated.
If you do not agree with this
determination, you may appeal to the Tax Commission for a formal hearing. The
results of that hearing would constitute a declaratory judgment and be
appealable to the Utah State Supreme Court. A Notice of Appeal Rights and a
copy of the Utah Taxpayer Bill of Rights are attached.
For The Commission,
Alice Shearer
Commissioner