How did Texas tax the solution, delivery equipment, and applicator tips in the Caridex dental-caries removal system?

Plain-English summary

The Texas Comptroller said the Caridex solution qualified for sales-tax exemption. The Caridex 100 delivery system and applicator tips were taxable.

Billing controlled the combined sale. If the seller charged one lump-sum price for the complete system, the total charge was taxable. To exclude the solution from tax, its price had to be separately stated.

What this means for you

Although the solution and delivery components functioned together and had been approved as one system, Texas gave the components different tax treatment. A bundled price caused the taxable components to pull the entire charge into the tax base under this letter.

Common questions

Was the Caridex solution taxable? No.

Were the delivery system and applicator tips taxable? Yes.

What if everything was sold for one price? The total lump-sum charge was taxable.

How could the solution remain excluded? Its charge had to be separately stated.

Citations and references

• The letter cited no numbered statute or Comptroller rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0803A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 26, 1987

Dear ***:

Thank you for your letter of March 13, 1987, concerning the taxability
of the Caridex Caries Removal System.

The system is described in your letter as a caries removal system which
consists of chemical solution and a delivery system. The solution is
administered to a various lesion, via a tube which is attached to the
delivery system. As the solution is administered to the various
surface, a hand applicator is attached to the end of the system which is
used to abrade away the softened various material. Functionally the two
components (solution and delivery system) cannot be used independently
of each other. This was recognized by the Food and Drug Administration,
which approved the product as a system (solution and delivery system
together) for the removal of caries.

The following items are for sale:

Description Current Price

1. CARIDEX R 100 Delivery System $884.00 each

2. CARIDEX R Solution $ 55.00 per office

package

(3000 ML)

3. Applicator Tips (to be used with $ 12.95 each
   Delivery System)

Response: The Caridex Solution qualifies for exemption from sales tax.
The Caridex 100 Delivery System and Applicator Tips are taxable. If the
system is sold as a unit for one lump-sum price, the total charge is
taxable. In order to be excluded from tax, the solution must be
separately stated.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You way write me at the Tax Administration Division.

Sincerely,
Julie Pesl
Tax Policy Section
Tax Administration Division