Do X-ray dyes and contrast materials used in hospital diagnostic imaging, and surgical appliances like pacemakers, sutures, and bone cement, qualify for Utah's sales tax exemption for 'medicine'?

Plain-English summary

Someone asked the Tax Commission to clarify the scope of Utah's sales/use tax exemption for "medicine" under Utah Code Ann. § 59-12-104(10), as defined in § 59-12-102(4). That definition covers insulin, syringes, and medicine prescribed for human ailments and dispensed by a pharmacist or supplied by a physician/surgeon/podiatrist, plus medicine dispensed to hospital patients under a physician's direction, and oxygen/stoma supplies -- while expressly excluding auditory, prosthetic, ophthalmic, or ocular devices/appliances and alcoholic beverages.

The requester argued two categories should qualify as exempt "medicine" because the statute doesn't specifically exclude them:

1. Dyes and contrast materials used in hospital X-ray procedures -- used throughout diagnosis, mid-treatment verification, and confirming treatment worked.
2. Surgical appliances and substances like pacemakers, sutures, and bone cement -- items that treat ailments "medicinally or surgically" and aren't prosthetic devices (since they don't replace a body part).

The Commission rejected both. It held that Utah courts construe tax exemptions narrowly, and exemptions must be measured against what the statute's definition actually includes -- not granted simply because "the code contains no specific exclusion," which was the taxpayer's core theory. Applying that narrow-construction principle, neither the X-ray dyes/contrast materials nor the surgical appliances/substances (pacemakers, sutures, bone cement) fit within the statutory definition of "medicine," so both categories are taxable.

What this means for you

Hospitals, clinics, and healthcare providers purchasing diagnostic and surgical supplies

Don't assume an item qualifies as exempt "medicine" just because it's used in patient treatment and isn't expressly listed as excluded. Diagnostic materials (dyes, contrast agents) and surgical implantables/consumables (pacemakers, sutures, bone cement, and similar items) fall outside the narrow statutory definition in this ruling's analysis, even though they're integral to medical care.

Medical suppliers and distributors

If you sell diagnostic imaging materials or surgical appliances/substances to Utah healthcare providers, this ruling supports treating those sales as taxable rather than exempt "medicine" -- distinct from the separate home medical equipment exemption addressed in other Utah rulings (see PLR 95-021, PLR 96-112), which has its own different criteria.

Accountants and tax professionals

This ruling is a clean statement of Utah's narrow-construction canon for tax exemptions -- useful whenever a client argues an item should be exempt because a statute "doesn't say it isn't." The Commission's answer is that the burden runs the other way: the item must affirmatively fit the exemption's defined terms.

Common questions

Q: Are X-ray contrast dyes exempt from Utah sales tax as "medicine"?
A: No, per this ruling -- they don't fit the statutory definition of "medicine" in § 59-12-102(4), even though they're used throughout a patient's diagnosis and treatment.

Q: Are pacemakers, sutures, or bone cement exempt as "medicine"?
A: No, per this ruling. They aren't specifically listed as excluded, but the Commission held that isn't enough -- an item must affirmatively meet the definition's terms, and these don't.

Q: Does "the statute doesn't exclude it" mean an item is exempt?
A: No -- the Commission explicitly rejected that reasoning, citing Utah's rule that tax exemptions are narrowly construed against the taxpayer.

Q: Can I rely on this ruling for my own hospital supply purchases?
A: Not automatically -- it binds the Commission only for the taxpayer and the specific items presented (X-ray dyes/contrast materials and specific surgical appliances/substances). Other supplies would need their own analysis against the statutory definition.

Citations and references

Statutes:

• Utah Code Annotated § 59-12-104(10) (exempts "sales of medicine")
• Utah Code Annotated § 59-12-102(4) (defines "medicine": insulin, syringes, and prescribed/physician-supplied medicine, hospital-dispensed medicine, oxygen/stoma supplies; excludes auditory, prosthetic, ophthalmic, or ocular devices/appliances and alcoholic beverages)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/93-026.pdf

Original ruling text

Response November 30,
1993

Request

August 13, 1994

Mr. Joe Pacheco,
Commissioner

Utah State Tax
Commission

160 East 300 South

Salt Lake City, Utah
84144

Dear Commissioner
Pacheco:

This is a request for
a written ruling regarding the scope of the exemption provided for "medicine"
in Section 59-12-104(10) of the Utah Code Annotated. The word "medicine" is
defined in UCA 59-12-102(4) (a) (I) to mean "insulin, syringes, and any
medicine prescribed for the treatment of human ailments by a person authorized
to prescribe treatments and dispensed on prescription filled by a registered
pharmacist or supplied to patients by a physician, surgeon, or podiatrist; (ii)
any medicine dispensed to patients in a county or other licensed hospital if
prescribed for that patient and dispensed by a registered pharmacist or
administered under the direction of a physician or paramedic; (iii) any oxygen
or stoma supplies.. (b) "Medicine" does not include: (I) any auditory,
prosthetic, ophthalmic, or ocular device or appliance; or (ii) any alcoholic
beverage."

This definition has
not been modified or clarified by any rule promulgated by the Commission.
Therefore, I am seeking a ruling regarding items within areas that are neither
specifically included nor specifically excluded.

To give background,
one must refer to the common usage given to the words that are the subject of
the exemption. The word "Treatment" is defined rather broadly by Webster's New
Collegiate Dictionary "as the act or manner or an instance of treating
someone..." The word is further defined as "the techniques or actions
customarily applied in a specific situation" or "a substance or technique used
in treating..". The dictionary defines medicine rather broadly as well, giving
the following meanings: "a substance or preparation used in treating disease"
or, "something that affects well being" or, "the science and art dealing
with the maintenance of health and the prevention, alleviation or cure of
disease..." The definitions go on, but I think you see the need for further
clarification of the scope of the exemption.

One of the areas of
concern deals with dyes and contrast materials that are used by the Xray
department of a licensed hospital. These materials are used in several
different phases of the treatment of an ailment, which, by the way, is defined
as "a bodily disorder or chronic disease" and "2: unrest, uneasiness". The X
Rays are used as part of the treatment to verify the effectiveness of the total
effort to eradicate the disease; to verify the exact nature and extent of the
disease; and to determine the course of action to be taken in order to
eradicate the disease. The dyes are used as part of the treatment process for
the initial diagnosis, during the middle of the treatment as a treatment tool,
and at the end of the treatment as a verification that the treatment is on
course. In view of the wording of the exemption and definition, it seems to me
that the answer must be yes, these dyes and contrast materials are exempt,
especially since the code contains no specific exclusion.

There is an analogy to
this situation in the tax commission's treatment of auto repairs and the taxes
due upon making such repairs. The first process consists of identifying the
problem, usually through the use of diagnostic equipment. The same diagnostic
equipment is used throughout the repair process, and confirms that the problem
has been corrected at the end of the repair. The sales tax applies to the
charges for the diagnostic services throughout the repair process, even though
the charges for diagnostic services do not constitute charges for the repair of
tangible personal property.

The second area of
concern is somewhat different, but again, in view of the definitions involved,
there is a strong probability that these items would qualify. The area deals
with appliances, such as pace-makers, sutures, bone cement and similar
substances used to treat ailments either medicinally or surgically. Nowhere are
these items specifically excluded from the exemption. They are not prosthetic
devices, inasmuch as they do not replace a body part. They do qualify as "a
substance used in treating disease" since substance is defined as a physical
material which has a discreet existence.

I will appreciate your
confirmation that the dyes and contrast drugs and the appliances and substances
other than prosthetic devices are exempt from sales tax as a medicine.

Thank you for your
time and consideration in providing confirmation and favorable answers to this
request. Your prompt response will be appreciated.

Sincerely yours,

XXXXX

November 30, 1993

XXXXX

Re: Advisory Opinion -

• Sales Tax

Exemption of Prescribed Medicine

Dear XXXXX:

Your request for an
advisory opinion as to whether purchases of dyes and contrast materials used in
hospital X-ray activities and appliances such as pace-makers, sutures, bone
cement and similar substances qualify for sales or use tax exemption was
referred to the Auditing Division for their analysis.

The division's staff recommendations are
as follows:

1. The statute, Utah Code Annotated Section
   59-12-104(10) exempts from the sales and use tax "sales of medicine." U.C.A.
   Section 59-12-102(4) defines "medicine" as:

I) insulin, syringes, and any medicine
prescribed for the treatment of human ailments by a person authorized to
prescribe treatments and dispensed on prescription filled by a registered
pharmacist, or supplied to patients by a physician, surgeon, or podiatrist;

(ii)
any medicine dispensed to patients in a county or other licensed hospital if
prescribed for that patient and dispensed by a registered pharmacist or
administered under the direction of a physician; and

(iii)
any oxygen or stoma supplies prescribed by a physician or administered under
the direction of a physician or paramedic.

(b)
"Medicine" does not include:

(I)
any auditory, prosthetic, ophthalmic, or ocular device or appliance; or

(ii) any alcoholic beverage.

2. The courts have indicated that
   exemptions are to be narrowly construed. The exemptions must be viewed with
   regard to specifics defined as exempt, not with the view that items are exempt
   "since the code contains no specific exclusion" from the exemption as the
   opinion request concludes.

3. With regard to the specific items that
   are the subject of this opinion, dyes and contrast materials used in X-ray
   functions; appliances such as pace-makers, sutures, bone cement, and similar
   substances are not medicines for purposes of the exemption.

For The Commission,

Alice Shearer

Commissioner