Were diagnostic kits, controls, calibrators, and cell-stabilization products sold to Florida clinical laboratories exempt from sales tax?

Plain-English summary

The taxpayer sold diagnostic test kits, instrument controls and calibrators, and cell-stabilization products to clinical laboratories. The controls and calibrators monitored testing accuracy, while blood-collection tubes used reagents or preservatives to stabilize patient samples for later analysis.

Florida ruled that the products were exempt when used to diagnose or treat human disease, illness, or injury. Controls and calibrators qualified as chemical compounds and were a necessary part of reliable diagnostic testing because state and federal laboratory rules required validation of patient results.

The blood-collection and cell-stabilization products were also exempt because they contained chemical compounds and were used to test human blood for illness, disease, or injury. Products used for a non-diagnostic or non-treatment purpose would not receive the same exemption.

What this means for you

Ancillary laboratory materials can qualify when they are required components of the human diagnostic process, not just when they directly contact the patient. Product composition, laboratory use, and regulatory function should be documented.

Common questions

Were quality-control materials exempt? Yes. The ruling treated controls and calibrators as chemical compounds necessary to reliable diagnostic testing.

Were blood-stabilization tubes exempt? Yes, under the stated reagent or preservative composition and human blood-testing use.

Would the same products be exempt for nonmedical research? The ruling did not grant that result; the cited rule made non-diagnostic or non-treatment uses taxable.

Citations and references

• Fla. Stat. §§ 212.05, 212.055, and 212.08(2)(a) and Fla. Admin. Code rr. 12A-1.020(7)(a) and 59A-7.029, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11A-009

Original ruling text

SUMMARY
QUESTION: Whether diagnostic test kits, control and calibration materials and testing
supplies, such as cell stabilization products are exempt from Florida sales and use tax as
medical products when sold to clinical laboratories located in Florida.
ANSWER: Sales of diagnostic test kits, control and calibration materials, and testing
supplies, such as cell stabilization products, are exempt from Florida sales and use tax
when sold to clinical laboratories for the diagnosis or treatment of human disease, illness,
or injury.
April 15, 2011

XXX
XXX
XXX
Re:

Technical Assistance Advisement 11A-009
Florida Sales and Use Tax
Chemical Compounds and Test Kits
Sections 212.05, 212.055, 212.08, Florida Statute (F.S.)
Rules 12A-1.020, 59A-7.029, Florida Administrative Code (F.A.C.)
Petitioner: XXX (“Taxpayer”)

Dear
This letter is a response to your petition dated February 23, 2011, for the Department's
issuance of a Technical Assistance Advisement ("TAA") concerning the above
referenced petitioner and matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite criteria set forth in Chapter 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under the
authority of Section (s.) 213.22, F.S.
FACTS
Taxpayer is a manufacturer of hematology, chemistry, and immunology products.
Taxpayer’s products are sold to clinical laboratories. Its products are used exclusively in
the clinical laboratories as diagnostic test kits and as quality control and calibration
materials to monitor the performance characteristics of instruments in the clinical
laboratories. Taxpayer seeks guidance on its sales of the diagnostic test kits, control and
calibration materials and testing supplies which are sold to clinical laboratories within
Florida. Taxpayer describes its products as follows:
Controls and Calibrators: Hematology, chemistry and immunology quality control
materials used to monitor the performance characteristics of instruments in clinical

laboratories. Hematology and immunology controls are comprised of human and
mammalian cellular components in a stabilized medium (i.e. red blood cells, white blood
cells and platelets). Chemistry controls are aqueous in nature and contain various analytes
and enzymes present in human serum.
Cell Stabilization: Products include a line of blood collection tubes (BCT) which include
a reagent and/or a liquid chemical preservative that stabilize patient samples for
downstream analysis such as flow cytometry or nucleic acid testing.
REQUESTED ADVISEMENTS
Whether Taxpayer’s diagnostic test kits, control and calibration materials and testing
supplies, such as cell stabilization products are exempt medical products when sold to
clinical laboratories located in Florida.
TAXPAYER’S POSITION
Taxpayer’s position regarding the nontaxability of its product focuses directly on s.
212.08(2)(a), F.S. which discusses the exemption from sales and use tax of “chemical
compounds” and “test kits” which are used in the diagnosis of human disease and illness.
ANALYSIS and DISCUSSION
Unless a specific exemption applies, Section 212.05, F.S., provides it is the legislative
intent that every person is exercising a taxable privilege that engages in the business of
selling tangible personal property at retail in this state. For exercising such a privilege, a
tax is levied on each taxable transaction or incident. The tax is due and payable at the
rate of 6 percent, plus any applicable surtaxes imposed under Section 212.055, F.S., on
the total consideration received for each item or article of tangible personal property
when sold at retail in this state.
Section 212.08(2)(a), F.S., provides in part that there shall be exempt from Florida sales
and use tax chemical compounds and test kits used for the diagnosis or treatment of
human disease, illness, or injury. Further, this section provides an exemption from tax
for items that are included on Form DR-46NT, Nontaxable Medical and General Grocery
List, as approved by the Department of Health.
Rule 12A-1.020(7)(a), F.A.C., promulgated to administer Section 212.08(2)(a), F.S.,
provides that blood analyzers, blood collection tubes, and tubes containing chemical
compounds, and test kits used to test human blood for detectors of illness, disease, or
injury are specifically exempt from tax. However, chemical compounds and test kits that
are not used to diagnose or treat human disease, illness, or injury are subject to tax.
As stated above in s. 212.08(2)(a), F.S., chemical compounds and test kits which are used
for the diagnosis or treatment of human disease, illness, or injury are exempt from sales
and use tax. However, for the purposes of this statutory exemption the term "chemical
compound" is not defined, so the plain and common meaning of these words must be
considered and researched. The term "chemical" is defined as "a substance ... obtained

by a chemical process or used for producing a chemical effect.” 1 Further the term
"compound" is defined as "composed of or produced by the union of several elements,
ingredients, parts or things.” 2 Hence, a chemical compound would be a substance
formed by chemical union of two or more elements or ingredients in definite proportion
by weight, via a chemical process, having as a purpose the production of a chemical
effect.
Controls are reagents 3 which are standards of comparison in scientific experimentation
that are used for quality assurance for a particular test that is being conducted.
Calibrators are used to determine, check, or rectify the graduation of any instrument or
test giving quantitative measurements. Therefore, the controls and calibrators products in
question fit the description of "chemical compounds" under Section 212.08(2)(a), F.S.
It must now be determined if these controls and calibrators are used for the diagnosis or
treatment of human disease, illness, or injury.
Rule 59A-7.029, F.A.C., administered by the Agency for Health Care Administration,
provides that laboratories shall establish and follow written quality control procedures for
monitoring and evaluating the quality of the testing process of each method to assure the
accuracy and reliability of patient test results and reports in accordance with Clinical
Laboratory Improvement Amendments 4 (CLIA) requirements. The laboratory must
utilize test methods, equipment, instrumentation, reagents, materials, and supplies that
provide accurate and reliable test results and test reports as required by CLIA.
CLIA are United States federal regulatory standards that apply to all clinical laboratory
testing performed on humans in the United States. The CLIA Program sets standards and
issues certificates for clinical laboratory testing. CLIA defines a clinical laboratory as any
facility which performs laboratory testing on specimens derived from humans for the
purpose of providing information for the diagnosis, prevention, or treatment of disease or
impairment, and for the assessment of health. A key objective of the CLIA is to ensure
the accuracy, reliability and timeliness of test results regardless of where the test was
performed.
Since State and Federal regulations both require that a patient’s test results must be
validated by the use of calibration material or a control sample, these products are a
necessary part of test kit and the procedure which is used in the diagnosis or treatment of
human disease, illness, or injury. As such, they would be exempt from tax as chemical
compounds used for the diagnosis of human disease pursuant to Section 212.08(2)(a),
F.S.

1

Webster's New Collegiate Dictionary, page 189.
Webster's New Collegiate Dictionary, page 229.
3
Reagents are substances that produce chemical reactions used to detect, examine, or measure a
component, or to produce another substance because of its chemical or biological activity.
4
Clinical Laboratory Improvement Amendments of 1988 and Federal Rules Adopted Thereunder – Section
353 of the Public Health Service Act known as the Clinical Laboratory Improvement Amendments of 1988
and Title 42-Public Health, Chapter IV, Part 493, Laboratory Standards.
2

Concerning cell stabilization products, Form DR-46NT and Rule 12A-1.020(7)(a)5.,
F.A.C., provide that blood analyzers and blood collection tubes containing chemical
compounds, and test kits to test human blood for illness, disease, or injury are specifically
exempt from tax. Since Taxpayer’s products contain a reagent and/or a liquid chemical
preservative, and the product is sold for use in testing human blood for illness, disease or
injury, these items would also be exempt from tax as provided for by Section
212.08(2)(a), F.S. and Rule 12A-1.020(7)(a), F.A.C.
CONCLUDING STATEMENT
Taxpayer’s sales of diagnostic test kits, control and calibration materials, and testing
supplies, such as cell stabilization products, are exempt from Florida sales and use tax
when sold to clinical laboratories for the diagnosis or treatment of human disease, illness,
or injury.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S.,
which is binding on the Department only under the facts and circumstances described in
the request for this advice, as specified in Section 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized above. You are advised
that subsequent statutory or administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject similar future transactions to
a different treatment than expressed in this response.
You are further advised that this response, your request, and related backup documents
are public records under Chapter 119, F.S., and are subject to disclosure to the public
under the conditions of Section 213.22, F.S. Confidential information must be deleted
before public disclosure. In an effort to protect confidentiality, we request you provide
the undersigned with an edited copy of your request for Technical Assistance
Advisement, the backup material, and this response, deleting names, addresses, and any
other details which might lead to identification of the taxpayer. Your response should be
received by the Department within 10 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you
may contact me directly at 850-717-6735.
Kind Regards,

Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
ARF\pb
Record ID:

98737