Missouri DOR: Purchase of Medical Grade Oxygen Exempt, but Purchase of Nitrous Oxide Subject to Sales Tax

Monday, June 11th, 2012


The Missouri Department of Revenue (DOR) recently issued a letter ruling explaining the taxability of medical grade oxygen and nitrous oxide purchased and used in a dental practice. Mo. Ltr. Rul. No. LR 7101 (Dept. of Revenue May 29, 2012). The DOR ruled that the clinic's purchases of medical grade oxygen are not subject to tax, but the clinic's purchases of nitrous oxide are taxable.

The party that requested the ruling is a dental clinic that purchases medical grade oxygen and nitrous oxide. In order to sedate patients for dental treatment, the clinic's dentists mix the gasses together and administer the mixture to patients. Once a patient is under the desired effects of conscious sedation, the dentist may perform dental procedures. The clinic asked whether its purchases of the two different gasses were subject to tax.

In Missouri, tangible personal property and certain services are subject to tax. Mo. Rev. Stat. sec. 144.020.1. However, "all sales of medical oxygen, home respiratory equipment, and accessories," are specifically exempt from state and local tax. Mo. Rev. Stat. sec. 144.030.2(18). Additionally, Missouri regulations state that "sales of prescription drugs, . . . medical grade oxygen, . . . which may be dispensed by a licensed practitioner are exempt from tax." Mo. Code Regs. Ann. tit. 12, sec. 10-110.013(3)(A). Accordingly, the dental clinic's purchase of medical grade oxygen is exempt from tax.

In constrast, the clinic's purchase of nitrous oxide is subject to sales tax. Missouri's sales tax statutes exempt prescription drugs that require approval by the Federal Drug Administration (FDA), but nitrous oxide is not listed as a prescription drug requiring approval by the FDA. Additionally, the exemption statute does not specifically list any other medical gas as exempt besides medical grade oxygen. Thus, the DOR concluded that the clinic's purchase of nitrous oxide is subject to tax.

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