Are Kirschner Wires (K-Wires), temporary bone-fracture implants, exempt from Tennessee sales tax, and did a 2008 law change affect the answer?

Plain-English summary

A medical device company sells Kirschner Wires (K-Wires) — thin wires temporarily implanted in about half of small bone-fracture cases, protruding through the skin for later removal, used to achieve internal traction and hold a fracture in place while it heals. They're sold both individually and bundled with related hardware, but this ruling covers only individual K-Wire sales (the taxpayer's request was limited to that scope). Because a Tennessee statutory amendment took effect January 1, 2008 — right around when this ruling issued — the Department had to analyze the K-Wires' taxability under two different legal regimes, before and after that date.

Through December 31, 2007: exempt as "orthotics." The old exemption covered "orthotics ... and other similarly medical corrective or support appliances and devices" — defined as devices that brace, support, or align the skeletal or muscular system. K-Wires, used to achieve traction and immobilize a fracture, fit squarely within that definition, so their sale was exempt as orthotics.

As of January 1, 2008: exempt as a "prosthetic device," but ONLY for human use. The amended statute swapped in a new "prosthetic device" exemption requiring an item to be (1) a replacement, corrective, or supportive device, (2) worn in or on the body, (3) used to correct a deformity/malfunction or support a weak/deformed body part, and (4) sold for human use. K-Wires satisfy the first three requirements the same way they did under the old orthotics test. But the new definition adds a human-use gate that didn't exist under the old orthotics exemption — so starting January 1, 2008, sales of K-Wires to veterinarians for animal use became taxable, even though the identical product sold for human medical use stays exempt.

What this means for you

Medical device manufacturers and distributors selling to both human and veterinary markets

Watch for exemption categories that get reclassified in statutory amendments — the underlying product and its medical function didn't change here, but the LEGAL basis for its exemption did, and the new category added a human-use restriction the old one didn't have. If you sell the same corrective/supportive device into both human and veterinary channels, confirm whether your product's exemption category (post-amendment) carries a human-use limitation before assuming veterinary sales stay tax-free just because they always have been.

Accountants and tax professionals

This ruling is a useful illustration of Tennessee's "orthotics" vs. "prosthetic device" exemption categories and their differing scopes (§ 67-6-314(5) vs. § 67-6-314(1)) around the 2007 Public Chapter 602 amendment. Also note the bundling footnote: when K-Wires are sold together with other items, each separately itemized and priced, taxability is determined item-by-item; but if items are sold as an unitemized bundle that includes any taxable item, the WHOLE bundle becomes taxable.

Common questions

Q: Are K-Wires sold to hospitals exempt from Tennessee sales tax?
A: Yes, when sold for human use — as orthotics through 2007, and as prosthetic devices from January 1, 2008 onward.

Q: Are K-Wires sold to veterinarians exempt?
A: Not after January 1, 2008. The new prosthetic-device exemption specifically requires human use, so veterinary/animal-use sales of K-Wires became taxable starting that date.

Q: Does bundling K-Wires with other hardware (holding devices, fixators) change the tax treatment?
A: If each item in the bundle is separately itemized and priced, each item's taxability is determined independently. If the bundle is sold at one unitemized price and includes any taxable item, the entire bundle becomes taxable.

Q: Can another medical device company rely on this ruling for a similar product?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts it was issued to, and it can be revoked or modified by the Commissioner. Confirm your own product's classification with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-6-314(5) (2006) (orthotics exemption, in effect through December 31, 2007)
• § 67-6-314(1) (Supp. 2007) (prosthetic device exemption for human use, effective January 1, 2008)
• § 67-6-102(62) (Supp. 2007) ("prosthetic device" definition)
• § 67-6-101 et seq. (Retailers' Sales Tax Act)
• 2007 Tenn. Pub. Acts, Chapter 602 (effective January 1, 2008) (statutory amendment reclassifying the applicable exemption)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/08-06.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 08-06
WARNING
Letter rulings are binding on the Department only with respect to the individual taxpayer
being addressed in the ruling. This presentation of the ruling in a redacted form is
informational only. Rulings are made in response to particular facts presented and are not
intended necessarily as statements of Department policy.

SUBJECT
Application of the Tennessee sales and use tax to the sale of Kirschner Wires as medical
implants.
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon
the Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation
or modification shall be effective retroactively unless the following conditions are met, in which
case the revocation shall be prospective only:
(A) The taxpayer must not have misstated or omitted material facts involved in
the transaction;
(B) Facts that develop later must not be materially different from the facts upon
which the ruling was based;
(C) The applicable law must not have been changed or amended;
(D) The ruling must have been issued originally with respect to a prospective or
proposed transaction; and
(E) The taxpayer directly involved must have acted in good faith in relying upon
the ruling and a retroactive revocation of the ruling must inure to his detriment.
FACTS
[TAXPAYER] is a company that manufactures and sells medical implants and medical
instruments primarily to hospitals, surgical centers and veterinarians. One of the products the
Taxpayer sells is Kirschner Wires (“K-Wires”), which are wires typically implanted in patients
temporarily in small fracture cases. The K-Wires are sold individually as well as with other
related items, such as holding devices, external fixators, and implant modules.

K-Wires are implanted in a patient on a temporary basis in 50 percent of small fracture cases,
with the wire protruding through the skin for future extraction. The wire protrudes through the
skin because the K-Wires will migrate in the body, which occurs because K-Wires do not have
screw threads cut into them. After a short period, the wires are removed. K-Wires are seldom
kept in the body on a permanent basis. In large fracture cases, K-Wires are rarely implanted in a
patient, even on a temporary basis, because of the migration issues and the strength of the wire.
Based on materials provided by the Taxpayer, the K-Wires are medical corrective devices for use
in small fracture cases to achieve internal traction and immobilization of bone fractures.
QUESTION
Is the sale of K-Wires exempt for Tennessee sales and use tax purposes?
RULING
Yes, provided that as of January 1, 2008, the K-Wires are sold for human use.
ANALYSIS
Under the Retailers’ Sales Tax Act, Tenn. Code Ann. § 67-6-101 et seq., the sale of tangible
personal property, which includes K-Wires, is generally subject to sales and use tax. An item of
tangible personal property is exempt for purposes of the Tennessee sales and use tax only if the
item is specifically included within the scope of a statutory exemption. The Retailers’ Sales Tax
Act has been amended by 2007 Tenn. Pub. Acts, Chapter 602, effective January 1, 2008.
Accordingly, the exemption provisions applicable to the sale of K-Wires change as of January 1,
2008. The analysis provided below for the sale of K-Wires is divided into two sections, the first
discussing the Tennessee sales and use tax laws in effect through December 31, 2007, and the
second explaining the exemption provisions applicable as of January 1, 2008.
In addition, the Taxpayer indicated that the K-Wires are sold individually as well as in
conjunction with other related items.1 However, pursuant to the Taxpayer’s ruling request, the
scope of this letter ruling is limited only to the sale of K-Wires individually for sales and use tax
purposes.
1.

The Sales and Use Tax Laws in effect through December 31, 2007

The sale of K-Wires is exempt from the Tennessee sales and use tax as orthotics through
December 31, 2007.

1

Note that when several items are sold together, but each item is itemized and priced separately, the taxability of
each item is determined independently of the other items. Accordingly, if the sale of K-Wires individually is
exempt from the sales and use tax, then the sale of K-Wires included with other items is also exempt, provided that
the K-Wires are itemized and priced separately. However, if the K-Wires are sold in conjunction with other items
where each item is not itemized and priced separately, and group of items includes taxable items, then every item,
including the K-Wires, is subject to the sales and use tax.

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Tenn. Code Ann. § 67-6-314(5) (2006) provides an exemption from the sales and use tax for the
sale of “orthotics… and other similarly medical corrective or support appliances and devices.”
“Orthotics” is generally defined as “a branch of mechanical and medical science that deals with
the support and bracing of weak or ineffective joints or muscles.” MERRIAM-WEBSTER MEDICAL
DICTIONARY. The exemption for orthotics includes devices used to brace, support or align the
skeletal or muscular system. The Taxpayer sells K-Wires as medical corrective devices for use
in small fracture cases to achieve internal traction or immobilization of bone fractures.
“Traction” is generally defined as “a pulling force exerted on a skeletal structure (as in a
fracture) by means of a special device or apparatus.” MERRIAM-WEBSTER MEDICAL
DICTIONARY. The purpose of the K-Wires is to support or align the skeletal system, which falls
within the exemption for orthotics. Accordingly, through December 31, 2007, the sale of KWires is exempt from the sales and use tax as orthotics.
2.

The Sales and Use Tax Laws as of January 1, 2008

Effective January 1, 2008, the sale of K-Wires is exempt from the sales and use tax as
prosthetics, provided that the K-Wires are sold for human use.
Tenn. Code Ann. § 67-6-314(1) (Supp. 2007) provides an exemption from the sales and use tax
for prosthetic devices for human use. Tenn. Code Ann. § 67-6-102(62) (Supp. 2007) defines the
term “prosthetic device” in part as “a replacement, corrective or supportive device including
repair and replacement parts for same worn on or in the body,” which is used to “correct a
physical deformity or malfunction” or to “support a weak or deformed portion of the body.” In
other words, to qualify for an exemption from the sales and use tax as a prosthetic device, an
item must be: (1) a replacement, corrective or supportive device; (2) worn in or on the body; (3)
used to correct a deformity or malfunction or to support a weak or deformed part of the body;
and (4) sold for human use.
In this case, the Taxpayer sells K-Wires, which are implanted temporarily in a patient in small
fracture cases. The K-Wires act as a corrective device worn in the body to correct the skeletal
system after a small bone fracture, thus satisfying the first three requirements. In addition, KWires perform a similar function as “traction devices” worn on the body to correct large fracture
cases, and the exemption for prosthetic devices includes such traction devices worn on the body.
Accordingly, the sale of K-Wires is exempt from the sales and tax laws as prosthetic devices,
provided that the K-Wires meet the fourth requirement and are sold for human use.2
CONCLUSION
Until January 1, 2008, the sale of K-Wires is exempt from the sales and use tax as orthotics
under Tenn. Code Ann. § 67-6-314(5) (2006) because the K-Wires are used to support or align
the skeletal system. Furthermore, as of January 1, 2008, the sale of K-Wires is exempt from the
sales and use tax as prosthetic devices under Tenn. Code Ann. § 67-6-314(1) (Supp. 2007),

2

Note that because the exemption for prosthetic devices under Tenn. Code Ann. § 67-6-314(1) (2007) requires the
devices to be sold “for human use,” the sale of K-Wires to veterinarians for animal use is not included within the
exemption, and thus, is taxable for sales and use tax purposes.

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provided they are sold for human use, because the K-Wires are corrective devices worn in the
body used to correct a bone fracture.

Rachel Wheeler
Tax Counsel

APPROVED:

Reagan Farr
Commissioner of Revenue

DATE:

1-10-08

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