Sales Tax State Activity Update - October 2004

Arizona Rules on Taxability of Contrast Chemicals used in Radiological Studies

The Arizona Department of Revenue has issued a Private Taxpayer Ruling to discuss the taxability of contrast chemicals purchased for use in radiological examinations, such as X-rays. Contrast chemicals sometimes referred to as contrast media, are substances used to draw attention to specific parts of the body, such as organs, blood, or tissues, to make them more detectable during radiological studies. The chemicals can be taken orally by the patient or administered through an injection or as a suppository.

Contrast chemicals are legend drugs, meaning that that they can be purchased and administered only pursuant to a physician’s prescription. A prescription for the contrast chemicals is not issued directly to the patient. Rather, the radiologist or the clinics for which the radiologists work, purchase the contrast chemicals pursuant to a written or oral purchase order. The drug is administered by or under the supervision of a radiologist, a licensed physician, during the X-ray procedure. The patient or appropriate third party is billed for the X-ray procedure, which includes the cost of the contrast chemicals.

The Arizona Department of Revenue has concluded that sales of contrast chemicals, a legend drug, to radiologists are exempt according to A.R.S. § 42-5061(A)(8). An exemption is provided for drugs on the prescription of a member of the medical, dental or veterinarian profession who is licensed by law to administer such substances.

View the ruling at: http://www.revenue.state.az.us/privaterules/lr04004.pdf (Arizona Department of Revenue, Private Taxpayer Ruling LR04-004, 5/25/04)

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