Were named laboratory controls and calibrators used with patient specimens exempt from Florida sales tax?

Plain-English summary

Florida exempted the named laboratory controls and calibrators as chemical compounds used in diagnosing human disease. The products were Tripak (Cell-dyn), QCS controls, QBC controls, Precipath, Precinorm, and Urine Dipstick.

The Department treated controls and calibrators as reagents prepared to produce a chemical effect. Federal and Florida laboratory rules required control or calibration material to be processed with patient specimens so the laboratory could validate accuracy and precision before reporting patient results.

Because the products were a necessary part of testing patient specimens, their sale to Florida healthcare providers qualified under section 212.08(2)(a).

What this means for you

The exemption depended on use within actual patient diagnostic testing. Product labels such as “control” or “calibrator” were not enough without that required connection.

Common questions

Q: Were the controls treated as test kits? Florida classified them as chemical compounds.

Q: Why did diagnostic use matter? The exemption covered compounds used for diagnosis or treatment of human disease.

Q: Were proficiency-testing kits addressed? No. This ruling concerned controls used with patient specimens.

Citations and references

• Fla. Stat. § 212.08(2)(a) — chemical compounds and test kits used for diagnosis or treatment
• 42 C.F.R. § 493.1218 and Fla. Admin. Code r. 59A-7.029(7)(b) — control requirements cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-075

Original ruling text

SUMMARY

QUESTION: What is the taxable status of the following
controls, used in medical testing: Tripak (Cell-dyn), QCS
controls, QBC controls, Precipath, Precinorm and Urine

Dipstick?

ANSWER - Based on Facts Below: Chemical compounds and test

kits which are used for the diagnosis or treatment of human
disease, illness, or injury are exempt from tax. The

controls and calibrators in question fit the description of
“chemical compounds". The sales of tripak, (Cell-dyn), QCS
controls, QBC controls, Precipath, Precinorm and Urine
Dipstick to various healthcare providers in this state for

use in testing patient specimens are exempt from tax as

chemical compounds used for the diagnosis of human disease.

Dec 16, 1999

Re: TAA 99A-075
Chemical Compounds and Test Kits

Section 212.08(2)(a), F.S.

Dear:

This is in response to your letter of October 12, 1999, in which
you requested the issuance of a technical assistance advisement
on behalf of your client, XXX (hereinafter "Taxpayer’),

regarding the taxable or exempt status of certain controls known
as Tripak (Cell-dyn), QCS controls, QBC controls, Precipath,
Precinorm and Urine Dipstick. The controls are sold by your
client to various healthcare providers to be used in the medical
testing process. You provided brochures on the products in

question.

Applicable Authority

Section 212.08(2)(a), F.S., provides in part:

(2) EXEMPTIONS; MEDICAL.-

(a) There shall be exempt from the tax imposed by this
chapter any product, supply, or medicine dispensed in a
retail establishment by a pharmacist licensed by the state,
according to an individual prescription or prescriptions
written by a prescriber authorized by law to prescribe
medicinal drugs; hypodermic needles; hypodermic syringes;

chemical compounds and test kits used for the diagnosis or

treatment of human disease, illness, or injury; and common

household remedies recommended and generally sold for
internal or external use in the cure, mitigation,

treatment, or prevention of illness or disease in human
beings, but not including cosmetics or toilet articles,
notwithstanding the presence of medicinal ingredients
therein, according to a list prescribed and approved by the
Department of Health which list shall be certified to the
Department of Revenue from time to time and included in the
rules promulgated by the Department of Revenue. There
shall also be exempt from the tax imposed by this chapter
artificial eyes and limbs; orthopedic shoes; prescription
eyeglasses and items incidental thereto or which become a
part thereof; dentures; hearing aids; crutches; prosthetic
and orthopedic appliances; and funerals.... (Emphasis

Supplied)

DEPARTMENT RESPONSE

Section 212.08(2)(a), F.S., exempts from tax, chemical compounds
and test kits which are used for the diagnosis or treatment of
human disease, illness, or injury. The term "chemical compound"
is not defined for purposes of this statutory exemption, so the
plain and ordinary meaning of the words must be considered. The
term "chemical" is defined as "a substance... obtained by a
chemical process, prepared for use in chemical manufacturing or
used for producing a chemical effect." Webster's Third New
International Dictionary of the English Language, Unabridged
(hereafter referred to as "Webster's"), page 384. The term
"compound" is defined as "composed of or produced by the union

of several elements, ingredients, parts or things." Webster's

at page 466. A chemical compound would be a mixture or product,
comprised of various components and prepared via a chemical
process, having as a purpose the production of a chemical

effect.

Controls are reagents which are used for quality control of the
particular test being done. Calibrators contain reagents which
are used to calibrate the particular test. Therefore, the
controls and calibrators in question fit the description of

“chemical compounds" under s. 212.08(2)(a), F.S.

It must be determined whether these reagents or chemical
compounds are used for the diagnosis or treatment of human
disease, illness, or injury. Federal Regulation section

493.1218 requires that, for quantitative testing, testing
laboratories that report patient specific results must include

at least two samples of either calibration materials or control
materials not less frequently than once each run of patient
samples in order to assess the accuracy and precision of patient

test results.

In Rule 59A-7.029(7)(b), F.A.C., implemented by the Agency for
Health Care Administration, it states that control samples must
be included at least once with each run of patient specimens;
must be tested in the same manner as patient specimens; must be
processed through each step of patient testing; and must meet
the laboratory's criteria for acceptability prior to reporting

patient test results. Since the Federal regulations and the
Florida regulations both require that a batch of patient test
results must be validated by the use of calibration material or

a control sample, such as the ones in question, before the test
results can be reported to the prescribing physician, these
calibrators and controls are a necessary part of the procedure
which is used in the diagnosis or treatment of human disease,
illness, or injury. As such, your client's sales of Tripak,
(Cell-dyn), QCS, controls, QBC controls, Precipath, Precinorm
and Urine Dipstick to various healthcare providers in this state
for use in testing patient specimens are exempt from tax as
chemical compounds used for the diagnosis of human disease

pursuant to section 212.08(2)(a), F.S.

This response constitutes a Technical Assistance Advisement
under s.213.22, F.S. which is binding on the department only
under facts and circumstances described in the request for this
advice as specified in s.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 s. 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,
any 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 15 days of the date of this

letter.

Sincerely,

Jonathan E. Swift

Tax Law Specialist

Technical Assistance and Dispute Resolution

(850) 922-4840

Control No. 39201

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any
proceeding before the Technical Assistance and Dispute
Resolution Office, should contact that office at 850-488-0717
(voice), or 1-800-DOR-8331 (TDD), at least five working days

before such proceeding.