Which health-care and sports-medicine products are exempt from Kansas sales tax as prosthetic or orthopedic appliances?

Plain-English summary

A firm representing an out-of-state manufacturer of health-care and sports-medicine products asked how Kansas sales tax applies to four product categories. Kansas imposes sales tax on retail sales of tangible personal property (K.S.A. 79-3603), but exempts prosthetic and orthopedic appliances "prescribed in writing" by a licensed practitioner (K.S.A. 79-3606(r)), and also exempts certain purchases by or for hospitals (K.S.A. 79-3606(b)). The Department went category by category:

• Braces — Exempt under 79-3606(r) if sold pursuant to a doctor's prescription. The braces support the body and aid a bodily function, so they fit the prosthetic/orthopedic definition.
• Cold compression therapy — Taxable. These devices are used for treatment but do not fall within 79-3606(r).
• Blood flow equipment — As a hospital-based system, it may fall within 79-3606(b), and it also appears to fall within 79-3606(r); it is exempt if sold pursuant to a doctor's prescription.
• Blood circulation equipment — Appears to fall within 79-3606(r); exempt if sold pursuant to a doctor's prescription.

Finally, on shipping: if the item sold is taxable, the retailer's shipping and freight charges are also taxable (whether included or separately stated); if the item is exempt, the related shipping is exempt too (K.S.A. 79-3602(g) and (h)).

What this means for you

If you sell medical or sports-medicine devices into Kansas, the exemption turns on whether the item is a prescribed prosthetic/orthopedic appliance.

• Get the written prescription. The 79-3606(r) exemption for braces and the blood flow/circulation devices depends on a written prescription from a licensed practitioner — keep it to support the exempt sale.
• Treatment-only devices can be taxable. Cold compression therapy was taxable because it didn't fit the prosthetic/orthopedic definition, even though it's used under a doctor's advice.
• Hospital sales have a separate path. Sales for a hospital-based system may qualify under 79-3606(b) in addition to (r).
• Shipping rides with the goods. Freight on a taxable item is taxable; freight on an exempt item is exempt — separate stating doesn't change that.

Common questions

Are braces exempt from Kansas sales tax?
Yes, when sold pursuant to a written prescription — they are prosthetic/orthopedic appliances under 79-3606(r).

Is cold compression therapy taxable?
Yes. The Department found it is used for treatment but does not fall within the 79-3606(r) prosthetic/orthopedic exemption, so it is taxable.

Do blood flow and blood circulation devices qualify?
The Department found they appear to fall within 79-3606(r) (and the hospital-based blood flow system may also fit 79-3606(b)), so they are exempt if sold pursuant to a doctor's prescription.

How is shipping taxed?
Shipping follows the item: taxable if the product is taxable, exempt if the product is exempt, whether or not the freight is separately stated (79-3602(g) and (h)).

Citations and references

• K.S.A. 79-3603 — imposes Kansas retail sales tax; subsection (a) taxes "the gross receipts received from the sale of tangible personal property at retail within this state."
• K.S.A. 79-3606(r) — exempts "all sales of prosthetic or orthopedic appliances prescribed in writing" by a licensed practitioner; applied to braces and the blood flow/circulation devices.
• K.S.A. 79-3606(b) — exempts certain purchases by or for hospitals; cited as a possible additional basis for the hospital-based blood flow equipment.
• K.S.A. 79-3602(g) and (h) — cited for the rule that shipping and freight charges follow the taxability of the item sold.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-70.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 11, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX,

Your correspondence of February 17, 1999, has been referred to my attention. Its contents are duly noted. Your letter states as follows:

Our firm represents a client who is located outside of your state and who is involved in the manufacture of products which are used primarily in the health care and sports medicine areas.

We have segregated the primary products into four categories and request you to advise us in writing as to the taxability of each item in your state.

In order to respond to your inquiry, it is first necessary to inform you the Kansas retail sales tax is imposed by K.S.A. 79-3603. Subsection (a) of the statute provides, in part, for the imposition of sales tax on:

(a) The gross receipts received from the sale of tangible personal property at retail within this state.

Exemptions from Kansas sales tax are controlled by K.S.A. 79-3606. The statute provides, in subsections (b) and (r), for the exemption from sales tax of:

(b) all sales of tangible personal property or service, including the renting and leasing of tangible personal property, purchased directly by the state of Kansas, a political subdivision thereof, other than a school or educational institution, or purchased by a public or private nonprofit hospital or public hospital authority or nonprofit blood, tissue or organ bank and used exclusively for state, political subdivision, hospital or public hospital authority or nonprofit blood, tissue or organ bank purposes, except when: (1) Such state, hospital or public hospital authority is engaged or proposes to engage in any business specifically taxable under the provisions of this act and such items of tangible personal property or service are used or proposed to be used in such business, or (2) such political subdivision is engaged or proposes to engage in the business of furnishing gas, water, electricity or heat to others and such items of personal property or services are used on proposed to be used in such business.

(r) all sales of prosthetic or orthopedic appliances prescribed in writing by a person licensed to practice the healing arts, dentistry or optometry. For the purposes of this subsection, the term prosthetic and orthopedic appliances means any apparatus, instrument, device, or equipment used to replace or substitute for any missing part of the body; used to alleviated the malfunction of any part of the body; or used to assist any disabled person in leading a normal life by facilitating such person's mobility; but such term shall not include motor vehicles, accessories to be attached to motor vehicles or personal property which when installed becomes a fixture to real property.

The four categories described in your letter, and our responses concerning their taxability, are listed below.

Q1. Braces - They offer many different types of braces. These are considered Class I, where a prescription is not necessary. Ninety eight percent of all sales are based on a physician’s order and advice. The walking brace can be used in lieu of a plaster cast. It offers complete immobilization of the leg. Other braces are used for strains or sprains. They support the ankle inside and outside, but allow movement up and down. Both types of braces aids a bodily function, alleviates physical incapacity, supports part of the human body, external support prescribed for the purpose of correction or injuries to a bone, apparatus designed to activate or supplement a weakened or atrophied limb or function.
A1. Braces do fall within the perimeters of K.S.A. 79-3606(r). Therefore, they would be exempt from sales tax if sold pursuant to a doctor's prescription.

Q2. Cold Compression Therapy - This system applies controlled compression to minimize hemothrosis (blood clotting) and swelling along with the cold to minimize pain. The system has three basic components - a pocket wrap which holds the cold water that covers the injured area, a cooler that holds enough water and ice for 6 to 8 hours of therapy, and a tube that exchanges the water between the cooler and the pocket wrap. Depending on the injured area, it is used for acute sprains, strains, post operative surgery, trauma, rehabilitation, hamstring pulls, contusions, and other soft tissue injuries. Cold Compression Therapy is also classified as Class I and does not require a prescription however it is used under a doctor’s advice.
A2. These devices are used for treatment, but do not fall within the perimeters of K.S.A. 79-3606(r). Therefore, they would be subject to tax.
Q3. Blood Flow Equipment - A hospital based system that helps prevent blood clots in the veins in the legs, usually a problem after surgery. This system speeds up the blood flow to prevent clotting. It is used after surgery in lieu of blood thinners and anticoagulants. It is classified as Class II, sold only under the advice of a physician. Sales are stringently regulated by the FDA with the required 510k filing. We also sell covers so that each patient gets a fresh clean cover.
A3. Based on the limited description you have provided, as a hospital based system, these devices may fall within the perimeters of K.S.A. 79-3606(b). In addition, these devices appear to fall within the perimeters of K.S.A. 79-3606(r). Therefore, they would be exempt from sales tax if sold pursuant to a doctor's prescription.

Q4. Blood Circulation Equipment - This system prevents the abnormal excess accumulation of fluid in tissue. It is used to treat lymphodema, venus ulcers (skin ulcers that will not heal). It stabilizes circulation, increases oxygen and tissue tension and is also used by diabetic patients that have slow blood circulation.
A4. Based on the limited description you have provided, these devices appear to fall within the perimeters of K.S.A. 79-3606(r). Therefore, they would be exempt from sales tax if sold pursuant to a doctor's prescription.

Your letter goes on to state, “Our final area of concern is the tax treatment of shipping charges in your state. All products are shipped United Parcel Service (either “red” or “blue”).”

In response to your inquiry, please be advised if the item being sold is subject to tax, shipping and freight charges imposed by the retailer are also subject to tax. This is true whether the freight charge is included in the total product price on the purchase order or separately stated. Conversely, if the item being sold is not subject to tax, shipping and freight charges imposed by the retailer are not subject to tax. [See K.S.A. 79-3602(g) and (h).]

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 03/29/1999 Date Modified: 10/11/2001

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