Are orthodontists' clear aligners, protective gloves and masks, and give-away dental hygiene items subject to Connecticut sales and use tax?

Plain-English summary

This ruling sorts three kinds of orthodontic-practice purchases into taxable and exempt buckets:

• Custom clear aligners (the "Product") — exempt. The orthodontist takes molds and a third party makes a series of plastic trays that gradually shift teeth into alignment. Connecticut exempts "equipment worn as a correction or substitute for any functioning portion of the body," and DRS has long read that exemption to cover corrective devices used by dentists and orthodontists — braces, wires, headgear, retainers, brackets, bonding agents, and the like. Because clear aligners are simply a form of braces used to correct the mouth, their sale is exempt under Conn. Gen. Stat. § 12-412(19)(C).
• Gloves and masks worn by the orthodontist and staff — exempt. Connecticut exempts safety apparel that protects an employee from bodily harm. Clinical gloves and masks protect against transmission of infectious disease during treatment, so the orthodontist's purchases of them are exempt from use tax under Conn. Gen. Stat. § 12-412(91).
• Give-away dental hygiene items — taxable. Things the orthodontist hands patients for at-home use — floss threaders, retainer cases, interproximal brushes — get no exemption. There's no specific exemption for dental-hygiene items, so the orthodontist is the taxable consumer of them: they are taxable to the orthodontist at purchase, and if the retailer doesn't charge sales tax, the orthodontist must self-assess use tax.

The dividing line is who the item is for and whether an exemption names it. Corrective devices worn by the patient and employee safety gear have specific exemptions; consumable freebies the practice buys and gives away do not.

What this means for you

Orthodontists and dental practices

Treat clear aligners like traditional braces — an exempt corrective device. Your clinical gloves and masks are exempt safety apparel, so you shouldn't be paying tax on them either. But watch the give-away items: floss threaders, retainer cases, brushes, and similar take-home supplies are taxable to you. If a vendor doesn't charge you sales tax on those, you owe use tax and should self-assess it on your return. Review your supply invoices to make sure exempt items aren't being taxed and taxable give-aways aren't being overlooked.

Sellers of aligners and orthodontic supplies

Sales of corrective devices — including clear-aligner systems — to Connecticut orthodontists fall within the § 12-412(19)(C) exemption. Consumable patient give-aways sold to a practice are taxable retail sales; charge tax accordingly.

Accountants and tax professionals

The exemptions are Conn. Gen. Stat. § 12-412(19)(C) (corrective/substitute body equipment; see Conn. Agencies Regs. § 12-426-14(5)) and § 12-412(91) (safety apparel; Policy Statement 2004(4)). The taxable-give-away result rests on the default rule that tangible personal property consumed or given away by a business, absent an exemption, is taxable to that business — here triggering a use-tax self-assessment (see Informational Publication 2015(16)).

Common questions

Q: Are clear aligners taxable in Connecticut?
A: No. DRS treats clear aligners as a form of braces — a corrective device worn for a functioning portion of the body — so their sale is exempt under Conn. Gen. Stat. § 12-412(19)(C).

Q: Do orthodontists pay tax on gloves and masks?
A: No. Clinical gloves and masks are exempt safety apparel under Conn. Gen. Stat. § 12-412(91) because they protect staff from bodily harm (disease transmission) during treatment.

Q: What about items we give patients to take home?
A: Those are taxable. There's no exemption for dental-hygiene give-aways, so the orthodontist owes tax on floss threaders, retainer cases, interproximal brushes, and similar items — self-assessing use tax if the seller didn't charge sales tax.

Q: Does this ruling apply to my practice?
A: Not automatically. A Connecticut Ruling binds DRS only for the taxpayer and facts it addressed. Different products or uses could be treated differently.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-412(19)(C) (exemption for equipment worn as a correction or substitute for a functioning portion of the body)
• Conn. Gen. Stat. § 12-412(91) (exemption for safety apparel protecting employees from bodily harm)
• Conn. Gen. Stat. §§ 12-407 and 12-408 (imposition of sales and use taxes on retail sales)

Regulations:

• Conn. Agencies Regs. § 12-426-14(5) (corrective/substitute body-part equipment exemption)

Administrative guidance:

• Policy Statement 2004(4), Sales and Use Tax Exemption for Safety Apparel
• Informational Publication 2015(16), Q&A on the Connecticut Use Tax for Businesses and Professions

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 2016-4

Original ruling text

Ruling 2016-4, Sales and Use Taxes, Medical Equipment, Orthodontist

FACTS:

Orthodontists use custom-made aligners (the “Product”) to straighten a patient’s teeth. The orthodontist takes molds of the patient’s teeth and sends the molds to a third party that makes a series of trays to fit the patient. The trays are made of plastic that will gradually shift the patient’s teeth into alignment. The patient changes to a new set of trays approximately every two weeks until the treatment is complete.

Orthodontists routinely use various additional items in their practice, such as rubber clinical gloves and clinical masks worn in treating patients. Orthodontists also routinely provide dental care items to their patients to use during the course of treatment, including floss threaders, retainer cases, and interproximal brushes.

ISSUES:

1.      Are sales of the Product subject to sales and use taxes?

2.      Are purchases of gloves and masks worn by orthodontists and their staff during the treatment of patients subject to use tax?

3.      Are purchases of items that are given away by orthodontists to aid their patients with dental hygiene during the course of treatment subject to use tax?

RULINGS:

1.      Sales of the Product are exempt from sales and use taxes under Conn. Gen. Stat. § 12-412(19)(C) as equipment worn as a correction for a functioning portion of the body.

2.      Purchases of gloves and masks worn by orthodontists and their staff during the treatment of patients are exempt from use tax pursuant to Conn. Gen. Stat. § 12-412(91).

3.      Purchases by orthodontists of tangible personal  property that they intend to give away to their patients to aid with dental hygiene are subject to use tax.

DISCUSSION:

Retail sales of tangible personal property in the State of Connecticut are subject to sales and use taxes, unless specifically exempt. Conn. Gen. Stat. §§ 12-407 and 12-408. Sales of equipment worn as a correction or substitute for any functioning portion of the body are exempt from sales and use taxes. Conn. Gen. Stat. § 12-412(19)(C); Conn. Agencies Regs. § 12-426-14(5). The Department has long interpreted this exemption to include corrective devices used by dentists and orthodontists. Such items include, but are not limited to, braces, caps, wires, headgear, orthodontic mouthpieces, orthodontic brackets, bonding agents, retainers, and rubber bands used for braces. The Product is a form of braces that is used as a correction for the mouth, and so qualifies for exemption from sales and use taxes under Conn. Gen. Stat. § 12-412(19)(C).

Safety apparel designed to protect an employee from bodily harm is exempt from sales and use taxes. Conn. Gen. Stat. § 12-412(91); see Policy Statement 2004(4) , Sales and Use Tax Exemption for Safety Apparel . Gloves and masks are used by orthodontists and their staff to protect against the transmission of infectious diseases during the treatment of patients. Accordingly, the purchase of these gloves and masks are exempt from use tax pursuant to Conn. Gen. Stat. § 12-412(91).

As stated above, retail sales of tangible personal property in the State of Connecticut are subject to sales and use taxes unless specifically exempt. Conn. Gen. Stat. §§ 12-407 and 12-408. There is no specific exemption for items used for dental hygiene. Therefore, items given to patients for at-home use are taxable to the orthodontist upon their purchase. If sales tax is not collected by the retailer on the sale of these items to the orthodontist, the orthodontist must self-assess the use tax due on the purchase of these items. See Informational Publication 2015(16) , Q&A on the Connecticut Use Tax for Businesses and Professions.

LEGAL DIVISION

December 20, 2016