Do physician-prescribed graduated compression stockings qualify for Illinois's reduced 1% sales tax rate on medical appliances, instead of the general 6.25% rate?

Plain-English summary

An individual wrote to the Illinois Department of Revenue asking whether her physician-prescribed graduated compression stockings should be taxed at Illinois's reduced 1% "low/medical" sales tax rate rather than the general 6.25% merchandise rate. She described being diagnosed with severe reflux in several leg veins (great saphenous, small saphenous, and calf/thigh tributaries) after an ultrasound vascular procedure, and having her cardiologist order compression stockings (20-30 mmHg, later a knee-high pair) to treat the condition. She was measured and fitted at a supplier, paid $109.99 plus $8.80 sales tax for one pair and $75.99 plus $6.08 sales tax for a second pair, and her Medicare Advantage insurer reimbursed the stockings themselves but told her the sales tax portion was not eligible for reimbursement -- which led her to ask whether the stockings should have been taxed at the lower medical rate in the first place.

The Department explained the general framework: the Illinois Retailers' Occupation Tax (35 ILCS 120/2; 86 Ill. Adm. Code 130.101) and the Use Tax (35 ILCS 105/3; 86 Ill. Adm. Code 150.101) together make up what's commonly called Illinois "sales" tax, and all gross receipts from sales of tangible personal property are taxed at the general 6.25% state rate (plus local taxes) unless a specific exemption or reduced rate applies. Medicines and medical appliances are instead taxed at a reduced 1% state rate (plus applicable local taxes) under 86 Ill. Adm. Code 130.311, which covers prescription and nonprescription medicines/drugs, medical appliances, and items like insulin, urine testing materials, and syringes/needles used by diabetics.

The Department then walked through the regulatory definitions: a "medicine or drug" is a preparation for human use that purports on its label to have medicinal qualities (i.e., a written claim that it cures, treats, or mitigates disease, illness, injury, or pain). A "medical appliance" is an item used to directly substitute for a malfunctioning part of the human body -- examples given include artificial limbs, dental prostheses, orthopedic braces, wheelchairs, pacemakers, and dialysis machines, as well as corrective appliances like hearing aids, eyeglasses, and contact lenses, and generally home glucose monitors and test strips. Critically, the Department noted that support hose and socks generally do NOT qualify for the low rate, but graduated compression stockings and anti-embolism stockings are different: because their graduated compression is designed to aid blood flow up the legs where the vein valves aren't functioning properly (rather than just providing generic support), they have been found to qualify for the low rate.

Applying this to the facts described, the Department said it "appears" the compression stockings may qualify for the 1% rate, but it could not give a definitive answer without more information. It recommended the taxpayer ask her doctor to confirm in writing that the stockings are used to directly substitute for a malfunctioning part of the body, and said that a physician's note plus a copy of the Department's letter would be sufficient documentation for the retailer to apply the low rate and keep in its books and records.

What this means for you

Consumers who buy compression stockings or similar prescribed medical items

If a doctor prescribes graduated compression stockings or anti-embolism stockings to treat a vein condition, this letter is useful support for the position that they belong in the reduced 1% "medical appliance" category rather than the general 6.25% rate -- as long as you can document that the graduated compression is medically substituting for malfunctioning vein valves, not just providing generic support. Ordinary, non-graduated support hose or socks generally do NOT get the reduced rate. The Department's suggested fix here was a physician's note confirming the medical purpose, kept together with a copy of this letter, for the retailer's records.

Retailers who sell compression garments, medical appliances, or similar items

This letter reinforces the line the Department draws: generic "support hose and socks" are taxed at the general rate, but graduated compression stockings and anti-embolism stockings -- which function differently by aiding impaired venous blood flow -- can qualify for the reduced 1% rate. Since a GIL doesn't bind the Department as to any particular sale, if you want certainty for your product line, consider obtaining documentation (a customer's physician's note) as the Department suggests here, or pursuing your own binding Private Letter Ruling for a recurring fact pattern.

Accountants and tax professionals

Note that this GIL does not reach a firm conclusion -- it says the stockings "may qualify" and that "without more information, the Department cannot provide a definitive answer." When advising clients on similar products, the operative test under 86 Ill. Adm. Code 130.311 is still whether the item directly substitutes for a malfunctioning body part (here, malfunctioning vein valves), and physician documentation is the recommended way to substantiate that for the retailer's records. Remember this is a GIL, not a PLR: it is not a statement of Department policy and is not binding, even on the person who requested it.

Common questions

Q: Do compression stockings qualify for Illinois's reduced 1% sales tax rate?
A: According to this GIL, it appears they may, if they are graduated compression stockings or anti-embolism stockings prescribed to treat a vein condition (as opposed to ordinary support hose or socks) -- but the Department said it could not give a definitive answer without more information about the specific facts.

Q: What's the difference between ordinary support hose and stockings that might qualify for the reduced rate?
A: The Department said support hose and socks generally do not qualify for the low rate, but graduated compression stockings and anti-embolism stockings are different: their graduated compression is intended to aid blood flow up the legs where vein valves don't function properly, and such stockings have been found to qualify for the low rate.

Q: What documentation does the Department recommend to support the reduced rate?
A: A physician's note stating that the compression stockings are used to directly substitute for a malfunctioning part of the human body, kept together with a copy of the Department's letter, which the Department said would constitute sufficient documentation for the retailer to apply the low rate and retain in its books and records.

Q: What is a "medical appliance" under Illinois's sales tax regulations?
A: Per 86 Ill. Adm. Code 130.311, a medical appliance is an item used to directly substitute for a malfunctioning part of the human body. Examples given in this letter include artificial limbs, dental prostheses and orthodontic braces, crutches and orthopedic braces, wheelchairs, heart pacemakers, dialysis machines, hearing aids, eyeglasses, and contact lenses.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter (GIL) issued under 2 Ill. Adm. Code 1200.120, which is not a statement of Department policy and is not binding on the Department, even as to the taxpayer who requested it. A binding answer would require a Private Letter Ruling under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act - imposition of tax)
• 35 ILCS 105/3 (Use Tax Act - imposition of tax)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax - nature of tax)
• 86 Ill. Adm. Code 130.311 (Drugs, Medicines, Medical Appliances and Grooming and Hygiene Products)
• 86 Ill. Adm. Code 150.101 (Use Tax - nature of tax)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0015-GIL.pdf

Original ruling text

ST 24-0015-GIL 03/27/2024 FOOD, DRUGS & MEDICAL APPLIANCES
This letter discusses the rules regarding the taxability of drugs and medical appliances. See
86 Ill. Adm. Code 130.311. (This is a GIL.)
March 27, 2024
NAME
ADDRESS
Dear NAME:
This letter is in response to your email dated March 26, 2024, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings ("PLRs") are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to
the taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the
PLR are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs
found in the Department's regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General
Information Letter ("GIL") is to direct taxpayers to Department regulations or other sources of
information regarding the topic about which they have inquired. A GIL is not a statement of
Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may
access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other types of
information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we respond
with a GIL. In your letter you have stated and made inquiry as follows:
This is a request for a Private Letter Ruling on the eligibility for the low/medical tax rate
on my physician prescribed compression stockings.
On DATE I saw my cardiologist, DOCTOR. At that time I advised her of how the
varicose veins in my legs were becoming painful. She ordered a [sic] ultrasound
vascular procedure be done on my legs. This test was preformed [sic] on DATE1 at
PROVIDER office in CITY, IL. DOCTOR1 was the interpreting physician of the results
of that procedure.
The conclusions included the following information:
Severe reflux in the right great saphenous vein and left great saphenous vein
Severe reflux in the right small saphenous vein
Severe reflux in the right calf tributaries and left calf tributaries Severe
reflux in the left thigh tributaries.

NAME
Page 2
March 27, 2024

On DATE2 DOCTOR placed an order for compressions stockings 20 to
30 mmHg to above the knee. The RN at PROVIDER cardiology advised
that this type of stockings could be secured from SUPPLIER at
ADDRESS1. I would need to be measured and show them my
physician's order to obtain the proper stockings.
On DATE3 I was able to go in to that establishment, was measured, and
ordered my prescription stockings. The subtotal for one pair was $109.99
for which I was charged an additional $8.80 sales tax.
It took a couple weeks for the stockings to be delivered to the store, and
I started wearing them immediately when picked up.
On DATE4 I had an appointment with DOCTOR1, Intervention
Cardiologist. We discussed my condition and the benefit of these
stockings. He indicated if I wanted to get a second pair, it would be okay
to get the knee high version to alternate wearing with the over the knee
stockings.
On DATE5 I ordered the knee high pair from SUPPLIER. I was charged
$75.99 plus $6.08 sales tax.
I was able to submit the bills for both pair of stockings to my insurance
company COMPANY where I have a Medicare Advantage Plan. They
covered the amounts less the co-pay but indicated the sales tax was not
eligible and I should not have to pay that charge. This got me to thinking
and investigating whether these stockings should be taxed at the
low/medical rate. Calls were placed to SUPPLIER to inquire about the
lower rate. They denied any adjustment.
It just seems strange that after going through a significant testing
procedure, having a cardiologist and an interventional cardiologist
recommend my need for these stockings, having to provide a written
documentation of my need and having my legs measured, that these
stockings wouldn't qualify for the lower medical tax rate. I was fortunate
to have a portion of my payment reimbursed by my medical insurance
(another aspect which indicates the "medical" of my purchase).
DEPARTMENT'S RESPONSE:

The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in

NAME
Page 3
March 27, 2024
this State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is
imposed on the privilege of using, in this State, any kind of tangible personal property that
is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales” tax in Illinois. If the
purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time
of purchase. The retailers are then allowed to retain the amount of Use Tax paid to
reimburse themselves for their Retailers’ Occupation Tax liability incurred on those sales.
If the purchases occur outside Illinois, purchasers must self-assess their Use Tax liability
and remit it directly to the Department.
All gross receipts from sales of tangible personal property in Illinois are subject
to Retailers' Occupation Tax unless an exemption is specifically provided. Medicines
and medical appliances are not taxed at the basic State rate of 6.25% plus applicable
local taxes. These items are taxed at a reduced State rate of 1% plus applicable local
taxes. See 86 Ill. Adm. Code 130.311, Drugs, Medicines, Medical Appliances and
Grooming and Hygiene Products. Items subject to this lower tax rate include
prescription and nonprescription medicines, drugs, medical appliances, and insulin,
urine testing materials, syringes, and needles used by diabetics, for human use. See
86 111. Adm. Code 130.31 l(a).
A medicine or drug is defined as any pill, powder, potion, salve, or other
preparation for human use that purports on the label to have medicinal qualities. A
written claim on the label that a product is intended to cure or treat disease, illness,
injury or pain, or to mitigate the symptoms of such disease, illness, injury or pain
constitutes a medicinal claim. See 86 Ill. Adm. Code 130.31 l(c)(l) for examples of
medicinal claims.
A medical appliance is an item that is used to directly substitute for a
malfunctioning part of the human body. Included in the exemption as medical
appliances are such items as artificial limbs, dental prostheses and orthodontic braces,
crutches and orthopedic braces, wheelchairs, heart pacemakers, and dialysis
machines (including the dialyzer). Corrective medical appliances such as hearing aids,
eyeglasses and contact lenses qualify for 1% rate. Moreover, generally, home glucose
monitors, test strips and related supplies used to treat human diabetes also qualify for
the I% State rate of tax. See 86111. Adm. Code 130.31 l(d).
Support hose and socks do not generally qualify for the low rate of tax. However,
graduated compression stockings and anti-embolism stockings differ from support
hose in that their graduated compression is intended to aid in the flow of blood up the
legs where valves in the blood vessels do not function properly. Graduated
compression stockings and anti-embolism stockings have been found to qualify for the
low rate.

NAME
Page 4
March 27, 2024
It appears based on the information provided in your letter that the compression
stockings may qualify for the low rate of tax imposed on medical appliances. However,
without more information, the Department cannot provide a definitive answer. I
recommend that you contact your doctor and inquire whether the compression
stockings prescribed for you are used to directly substitute for a malfunctioning part of
the human body and, therefore, meet the requirements to qualify for the low rate of tax
on medical appliances. A physician's note stating this finding along with a copy of
this letter would constitute sufficient documentation to demonstrate the applicability
of the low rate of tax, and the retailer should maintain such documents in its books
and records.
I hope this information is helpful. If you require additional information, please
visit our website at www.tax.illinois.gov or contact the Department's Taxpayer
Information Division at (217) 782-3336.
Very truly yours,
Richard S. Wolters
Associate Counsel
RSW