CITY OF COLORADO SPRINGS TAX GUIDE MEDICAL EXEMPTIONS

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1 CITY OF COLORADO SPRINGS TAX GUIDE MEDICAL EXEMPTIONS The City of Colorado Springs Sales and Use Tax Ordinance contains a medical exemption and definitions that, when combined, provide a variety of exemptions for qualified purchases. PURCHASES BY LICENSED PRACTITIONERS The terms doctor, practitioner, licensed physician, and licensed practitioner of the healing arts include medical doctors and osteopaths, dentists, podiatrists, and veterinarians licensed by the State of Colorado to practice medicine but do not include chiropractors. All purchases by doctors that are not included within the MEDICAL EXEMPTION are taxable to the doctor. Taxable purchases include office equipment and supplies (computers, software, furniture, fixtures, subscriptions, office supplies, forms, files, etc.); medical equipment and instruments( X-ray machines, exam tables, lab equipment, hand instruments, wheelchairs, thermometers, stethoscopes, sphygmomanometers, etc.); other supplies (latex gloves, syringes, X-ray film, gauze, alcohol, towels, masks, tongue blades, urine sample cups, disinfectant, drape sheets, uniforms, gowns, urine and blood test kits, etc.). If City sales tax is not charged to the doctor by the vendor of taxable items, the doctor is required to pay use tax on those purchases directly to the City. All sales of prosthetic devices, orthopedic appliances, therapeutic devices, or oxygen and related accessories that are sold in accordance with a written recommendation of a licensed practitioner or are furnished as part of the professional services provided to the patient are exempt from City sales or use tax. Prescription drugs, insulin, and glucose purchased by a doctor and sold to a patient or administered in individual doses to a patient in connection with the rendering of the professional service are exempt. All purchases of medical supplies, including drugs or materials when furnished by a doctor as part of professional services provided to a patient, are exempt. As a general rule, an item must go out the door attached to the patient to qualify as a medical supply. Examples of nontaxable medical supplies include adhesive tape, bandages, casting materials, dressing, splints, braces & supports, sutures, over-the-counter-medications, etc.

PURCHASES BY LICENSED PRACTITIONERS The terms doctor, practitioner, licensed physician, and licensed practitioner of the healing arts include medical doctors and osteopaths, dentists, podiatrists,

2 PURCHASES BY PATIENTS Purchases by individuals are taxable unless the item is included within the MEDICAL EXEMPTION in the Sales Tax Ordinance, and the purchase is made in accordance with a prescription or written recommendation of a licensed practitioner. Taxable purchases include items such as over-the-counter medications, bandages, canes, crutches, incontinent supplies, syringes (but see EXEMPT PURCHASES below), surgical supplies, toilet seats, patient lifts, etc. Items such as waterbeds, hot tubs, spas, elastic knee braces, and exercise equipment, even though they may offer some therapeutic value, do not qualify for the therapeutic exemption because they are not designed specifically for therapeutic purposes. Sales and purchases of drugs, whether for human or animal use, dispensed in accordance with a prescription are exempt from City sales or use tax. Purchases of medical supplies, when sold in accordance with a written recommendation of a licensed practitioner are exempt. Medical supplies include insulin, glucose usable for treatment of insulin reactions, urine and blood testing kits and materials, insulin measuring and injecting devices, wheelchairs and hospital beds, and corrective eyeglasses, contact lenses, or hearing aids. Sales and purchases of prosthetic devices, orthopedic appliances, therapeutic devices, and oxygen and related accessories when sold in accordance with a written recommendation of a licensed practitioner are exempt. Examples of items which qualify in this category include but are not limited to: Alternating pressure pumps, pads Apnea monitors Aspirators and suction equipment Arms, artificial Blood, human, whole Blood products & derivatives Breast forms for mastectomy Catheters, permanent Colostomy bags Colostomy sets Colostomy supplies Continuous pressure motion machine Dentures and dental appliances Eyes, artificial Hands, artificial Hemodialysis products Infusion pumps Intermittent pulsating pressure breather Larynxes, artificial Legs, artificial Nebulizers Orthotics & inserts Ostomy supplies Otology implants Pacemakers Percussors Surgical brassieres TENS units Traction

Taxable purchases include items such as over-the-counter medications, bandages, canes, crutches, incontinent supplies, syringes (but see EXEMPT PURCHASES below), surgical supplies, toilet seats,

3 PURCHASES BY HOSPITALS: Hospitals, clinics, nursing homes, or other medical facilities are businesses that provide medical care. As such, purchases by these businesses are generally taxable. However, many hospitals qualify as tax-exempt organizations or are owned and operated by governmental entities. Direct sales to tax-exempt organizations, for use in the conduct of their tax-exempt functions, and all direct sales to governmental entities, are exempt from tax. See TAXABLE SALES below for treatment of sales by all medical care facilities. If a medical care facility is not operated by a tax-exempt organization or governmental entity, most purchases of equipment and supplies are taxable to the facility. The only tax-exempt purchases are in those categories listed below which must be prescribed by a doctor and furnished or sold to the patient. Examples of taxable purchases include all purchases which are not included within the MEDICAL EXEMPTION, such as office equipment and supplies (computers, software, copy machines, filing systems, furniture, fixtures, subscriptions, office supplies, forms, files, etc.); medical equipment and instruments( X-ray machines, exam tables, lab equipment, hand instruments, wheelchairs, hospital beds, televisions, operating room equipment, patient room furniture, thermometers, stethoscopes, sphygmomanometers, etc.); other supplies (latex gloves, syringes, X-ray film, gauze, adhesive tape, bandages, casting materials, dressing, splints, braces & supports, sutures, over-the-counter-medications, alcohol, cotton balls, sterile gowns & towels, masks, tongue blades, urine sample cups, disinfectant, drape sheets, uniforms, disposable towels, urine and blood test kits, etc.). If City sales tax is not charged to the hospital by the vendor of taxable items, the hospital is required to pay use tax on those purchases directly to the City. Exempt purchases by other than tax-exempt hospitals include drugs and insulin dispensed pursuant to the direction of a licensed practitioner, glucose usable for the treatment of insulin reactions, therapeutic, orthopedic, and prosthetic devices, and oxygen and related accessories when furnished as part of the professional service provided to the patient. TAXABLE SALES: If a separate charge is made by a medical care facility for certain items used by the patient, the charge is a taxable sale; the facility must have a City sales tax license and must collect sales tax even if the facility is a tax-exempt entity. These items are taxable if the patient buys the same items outside of the hospital, and they include: Admission kits Chapstick Deodorant Baby supplies Commode pan Disposable diapers Bath oil Denture supplies Disposable pillows

Direct sales to tax-exempt organizations, for use in the conduct of their tax-exempt functions, and all direct sales to governmental entities, are exempt from tax.

4 TAXABLE SALES, cont. EXAMPLES Foot Cream Mouthwash Slippers Garment bags Pacifiers Soap Hand lotion Sanitary pads Tampons Ice buckets Shampoo Tissues Incontinent supplies Shaving supplies Toothpaste Maternity kits 1. Mary goes to her local drug store to purchase insulin measuring and injecting devices. She provides the pharmacist with a written recommendation from her doctor. The purchase is not subject to City sales tax. 2. Dr. Johnson purchases penicillin in bulk to be administered in single doses to her patients. The purchase of the penicillin by the doctor is the purchase of a medical supply to be furnished as part of a professional service provided to the patient and is not subject to City sales or use tax. 3. Dr. Johnson also purchases a case of tongue depressors for use in routine examinations. The tongue depressors are consumable supplies used by the doctor, and their purchase is subject to sales or use tax. 4. Allwell Hospital is a tax-exempt, charitable, health care facility that purchases a variety of medical equipment and medical supplies for its use in performing its charitable function. Direct purchases by Allwell of the medical equipment and supplies are exempt from the City tax. 5. Allwell also purchases admission kits which contain toiletries, a water pitcher, a wash pan, and facial tissue. The hospital issues one of these kits to all in-patients and imposes a separate charge on the patient s bill for the kit. The charge to the patient for an admission kit is a sale of taxable property, and the hospital, even though it is a taxexempt organization, is a vendor responsible for collecting and remitting City sales tax on the sale of tangible personal property. RELATED TAX GUIDE TOPICS Dentists and Dental Laboratories Drugs

Mary goes to her local drug store to purchase insulin measuring and injecting devices. She provides the pharmacist with a written recommendation from her doctor.

5 CS Code Section : WORDS & PHRASES DEFINED: DRUGS CS Code Section : WORDS & PHRASES DEFINED: MEDICAL SUPPLIES CS Code Section : WORDS & PHRASES DEFINED: PRESCRIPTION DRUGS FOR ANIMALS CS Code Section : WORDS & PHRASES DEFINED: ORTHOPEDIC DEVICE CS Code Section : WORDS & PHRASES DEFINED: PROSTHETIC DEVICES CS Code Section : WORDS & PHRASES DEFINED: THERAPEUTIC DEVICE CS Code Section : MEDICAL EXEMPTIONS CS Code Section B: RESPONSIBILITY FOR USE TAX PAYMENTS THE ABOVE INFORMATION IS A SUMMARY IN LAYMAN'S TERMS OF THE RELEVANT COLORADO SPRINGS TAX CODE FOR THIS INDUSTRY OR BUSINESS SEGMENT. IT IS NOT INTENDED FOR LEGAL PURPOSES TO BE SUBSTITUTED FOR THE FULL TEXT OF THE CITY OF COLORADO SPRINGS SALES AND USE TAX ORDINANCE. Revised 5/1/00

THERAPEUTIC DEVICE CS Code Section 2-7-429: MEDICAL EXEMPTIONS CS Code Section 2-7-603B: RESPONSIBILITY FOR USE TAX PAYMENTS THE ABOVE INFORMATION IS A SUMMARY IN LAYMAN'S TERMS OF THE RELEVANT

MEDICAL SUPPLIES AND EQUIPMENT

Financial Services Sales Tax Division 215 North Mason Street, 2 nd Floor P.O. Box 580 Fort Collins, CO 80522 970.221.6780 970.221.6782 - fax fcgov.com/salestax MEDICAL SUPPLIES AND EQUIPMENT This tax guide