TAX RELEASE: Prosthetic Devices-Eyeglasses and Contact Lenses-and their Accessories and Supplies

​Statutes: Sections 77.51(1f)(intro.) and (e), (3pj), and (11m), 77.52(1)(a), (20)(a) and (b), and 77.54(14), (22b), and (52), Wis. Stats. (2009-10)

Wis. Adm. Code: Section Tax 11.08(4)(c), Wis. Adm. Code (November 2010 Register) and sec. Tax 11.45(3)(b), Wis. Adm. Code (May 2010 Register)

Applicable Wisconsin Statutes:

Section 77.51(1f), Wis. Stats. (2009-10), defines "bundled transactions" as:

"…the retail sale of 2 or more products, not including real property and services to real property, if the products are distinct and identifiable products and sold for one nonitemized price."

Section 77.51(1f)(e), Wis. Stats. (2009-10), provides "bundled transaction" does not include, among other things:

"The retail sale of taxable tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) and tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) that is exempt from the taxes imposed under this subchapter, if the transaction includes food and food ingredients, drugs, durable medical equipment, mobility-enhancing equipment, prosthetic devices, or medical supplies and if the seller's purchase price or the sales price of the taxable tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) is no greater than 50% of the seller's total purchase price or sales price of all the tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) included in what would otherwise be a bundled transaction, as determined by the seller using either the seller's purchase price or the sales price, but not a combination of both."

Section 77.51(3pj), Wis. Stats. (2009-10), defines "drug" as:

"A compound, substance, or preparation, or any component of them, other than food and food ingredients, dietary supplements, or alcoholic beverages, to which any of the following applies:"

(a) It is listed in the United States Pharmacopoeia, Homeopathic Pharmacopoeia of the United States, or National Formulary, or any supplement to any of them.
(b) It is intended for use in diagnosing, curing, mitigating, treating, or preventing a disease.
(c) It is intended to affect a function or structure of the body.

Section 77.51(11m), Wis. Stats. (2009-10), defines "prosthetic device" as:

"…a device, including the repair parts and replacement parts for the device, that is placed in or worn on the body to artificially replace a missing portion of the body; to prevent or correct a physical deformity or malfunction; or to support a weak or deformed portion of the body."

Note (added August 8, 2013): The definition of "prosthetic device" was amended, effective July 2, 2013, to mean the following:

"…a device, including the repair parts and replacement parts for the device, that is placed in or worn on the body to artificially replace a missing portion of the body; to prevent or correct a physical deformity or malfunction; or to support a weak or deformed portion of the body."

Section 77.52(1)(a), Wis. Stats. (2009-10), provides:

"For the privilege of selling, licensing, leasing or renting tangible personal property at retail a tax is imposed upon all retailers at the rate of 5% of the sales price from the sale, license, lease or rental of tangible personal property sold, licensed, leased or rented at retail in this state, as determined under s. 77.522."

Section 77.52(20)(a), Wis. Stats. (2009-10), provides that:

"Except as provided in par. (b), the entire sales price of a bundled transaction is subject to the tax imposed under this subchapter."

Section 77.52(20)(b), Wis. Stats. (2009-10), provides:

"At the retailer's option, if the retailer can identify, by reasonable and verifiable standards from the retailer's books and records that are kept in the ordinary course of its business for other purposes, including purposes unrelated to taxes, the portion of the price that is attributable to products that are not subject to the tax imposed under this subchapter, that portion of the sales price is not taxable under this subchapter. This paragraph does not apply to a bundled transaction that contains food and food ingredients, drugs, durable medical equipment, mobility enhancing equipment, prosthetic devices, or medical supplies."

Section 77.54(14), Wis. Stats. (2009-10), provides an exemption for:

"The sales price from the sales of and the storage, use, or other consumption in this state of drugs that are any of the following:

(a) Prescribed for the treatment of a human being by a person authorized to prescribe the drugs, and dispensed on prescription filled by a registered pharmacist in accordance with law.
(b) Furnished by a licensed physician, surgeon, podiatrist, or dentist to a patient who is a human being for treatment of the patient.
(c) Furnished by a hospital for treatment of any person pursuant to the order of a licensed physician, surgeon, podiatrist, or dentist.
(d) Sold to a licensed physician, surgeon, podiatrist, dentist, or hospital for the treatment of a human being.
(e)Sold to this state or any political subdivision or municipal corporation thereof, for use in the treatment of a human being.
(em) Furnished for the treatment of a human being by a medical facility or clinic maintained by this state or any political subdivision or municipal corporation thereof.
(f) Furnished without charge to any of the following if the drug may not be dispensed without a prescription

  1. A physician.
  2. A surgeon.
  3. A nurse anesthetist.
  4. An advanced practice nurse.
  5. An osteopath.
  6. A dentist who is licensed under ch. 447.
  7. A podiatrist who is licensed under ch. 448.
  8. An optometrist who is licensed under ch. 449.

Section 77.54(22b), Wis. Stats. (2009-10), provides an exemption from Wisconsin sales and use tax for:

"The sales price from the sale of and the storage, use, or other consumption of durable medical equipment that is for use in a person's home, mobility-enhancing equipment, and prosthetic devices, and accessories for such equipment or devices, if the equipment or devices are used for a human being."

Section 77.54(52), Wis. Stats. (2009-10), provides an exemption from Wisconsin sales and use tax for:

"The sales price from the sales of and the storage, use, or other consumption of products sold in a transaction that would be a bundled transaction, except that the transaction meets the conditions described in s. 77.51 (1f) (e)."

Applicable Administrative Code:

Section Tax 11.08(4)(c), Wis. Adm. Code (November 2010 Register), and sec. Tax 11.45(3)(b), Wis. Adm. Code (May 2010 Register), provide examples of exempt prosthetic devices for a human being and include, among other things, corrective eyeglasses and contact lenses.

Question 1:

Do the following items meet the definition of "prosthetic device" and qualify for exemption from Wisconsin sales and use taxes under sec. 77.54(22b), Wis. Stats. (2009-10), if they are used for a human being?

  1. Corrective sunglasses
  2. Non-corrective sunglasses
  3. Corrective contact lenses
  4. Non-corrective contact lenses (i.e., contact lenses just worn to change the color of a person's eyes)
  5. Corrective reading glasses

Answer 1:

Corrective sunglasses, corrective contact lenses, and corrective reading glasses meet the definition of "prosthetic device" and are exempt from Wisconsin sales and use taxes. Note: Corrective reading glasses are a prosthetic device and are exempt even if they are not sold under a prescription.

Non-corrective sunglasses and non-corrective contact lenses do not meet the definition of "prosthetic device" because they are not a replacement, supportive, or corrective device and therefore do not qualify for this exemption.

Analysis 1:

Corrective sunglasses, corrective contact lenses, and corrective reading glasses

Products meeting the definition of "prosthetic device" and which are used for a human being are exempt from Wisconsin sales and use taxes as provided in sec. 77.54(22b), Wis. Stats. (2009-10).

As provided in sec. 77.51(11m), Wis. Stats. (2009-10), "prosthetic device" means "…a device, including the repair parts and replacement parts for the device, that is placed in or worn on the body to artificially replace a missing portion of the body; to prevent or correct a physical deformity or malfunction; or to support a weak or deformed portion of the body."

Section Tax 11.08(4)(c), Wis. Adm. Code (November 2010 Register), and sec. Tax 11.45(3)(b)5., Wis. Adm. Code (May 2010 Register), include eyeglasses and contact lenses among the examples of exempt prosthetic devices.

Therefore, corrective eyeglasses, corrective contact lenses, and corrective reading glasses qualify for this exemption because they correct a physical deformity or malfunction in the eyes.

Non-corrective sunglasses and non-corrective contact lenses

Non-corrective sunglasses and non-corrective contact lenses do not meet the definition of prosthetic device and therefore do not qualify for this exemption. Sales of non-corrective sunglasses and non-corrective contact lenses are subject to Wisconsin sales and use taxes under sec. 77.52(1)(a), Wis. Stats. (2009-10), as sales of tangible personal property.

Question 2:

Do the following items qualify for exemption from Wisconsin sales and use taxes under sec. 77.54(22b), Wis. Stats. (2009-10), as accessories for prosthetic devices (i.e., corrective eyeglasses or corrective contact lenses) if they are used for a human being?

  1. Neck Cords
  2. Sunglasses designed to be worn over corrective eyeglasses
  3. Repair parts and tools specifically for eyeglasses (i.e., nose pads, screws, eyeglass screwdriver, and repair kits)
  4. Eyeglass cases
  5. Contact lens cases
  6. Contact lens solution
  7. Eyeglass lens cleaning solution
  8. Non-disposable cleaning cloths
  9. Disposable cleaning cloths
  10. Contact lens travel kits (including solution and contact lens case)

Answer 2:

Neck cords, sunglasses designed to be worn over eyeglasses, repair parts and tools specifically for eyeglasses, cases for corrective eyeglasses, and non-disposable cleaning cloths purchased for corrective eyeglasses are exempt from Wisconsin sales and use taxes as accessories for prosthetic devices. Contact lens cases purchased for corrective contact lenses are also exempt from Wisconsin sales and use taxes as accessories for a prosthetic device.

Contact lens solution, eyeglass lens cleaning solution, and disposable cleaning cloths are taxable because they are supplies and therefore do not qualify for this exemption.

Contact lens travel kits that include contact lens solution and contacts lens cases are taxable if the seller's purchase price and sales price of the contact lens solution and other taxable products included in the kit is greater than 50% of the seller's total purchase price or sales price of all the products in the kit. If the seller's combined purchase price or sales price of the contact lens solution and other taxable products included in the contact lens travel kit are no greater than 50% of the seller's total purchase price or sales price of all the products in the kit, the entire sales price of the kit is exempt from Wisconsin sales and use taxes.

Analysis 2:

Neck cords, sunglasses designed to be worn over eyeglasses, repair parts and tools specifically for eyeglasses, cases for corrective eyeglasses, non-disposable cleaning cloths, and contact lens cases

Section 77.54(22b), Wis. Stats. (2009-10), provides, in part, an exemption from Wisconsin sales and use tax for "…prosthetic devices, and accessories for such…devices, if the…devices are used for a human being." Neck cords, sunglasses designed to be worn over eyeglasses, repair parts and tools specifically for eyeglasses, eyeglass cases, contact lens cases, and non-disposable cleaning cloths are accessories and qualify for this exemption if purchased for corrective eyeglasses, corrective sunglasses, corrective reading glasses, or corrective contact lenses.

Note: If neck cords, repair parts and tools, eyeglass cases, and non-disposable cleaning cloths are purchased for non-corrective sunglasses, the exemption in sec. 77.54(22b), Wis. Stats. (2009-10), does not apply. Additionally, contact lens cases purchased for non-corrective contact lenses do not qualify for this exemption. Accessories for non-corrective sunglasses and non-corrective contact lenses do not qualify for exemption because they are not accessories for prosthetic devices.

Contact lens solution, eyeglass lens cleaning solution, and disposable cleaning cloths

Section 77.54(22b), Wis. Stats. (2009-10), provides, in part, an exemption from Wisconsin sales and use tax for prosthetic devices and accessories for such devices, if the devices are used for a human being. Contact lens solutions, eyeglass lens cleaning solutions, and disposable cleaning cloths are supplies, rather than accessories for prosthetic devices, and therefore do not qualify for the exemption.

In addition, although the contact lens solution meets the definition of "drug" as provided in sec. 77.51(3pj), Wis. Stats. (2009-10), it does not qualify for any of the exemptions provided in sec. 77.54(14), Wis. Stats. (2009-10).

Therefore, the contact lens solution, eyeglass lens cleaning solution, and disposable cleaning cloths are subject to Wisconsin sales and use taxes.

Contact lens travel kit

Contact lens travel kits contain both taxable (contact lens solution) and nontaxable (contact lens case, travel case) products that are distinct and identifiable and sold for one non-itemized price. Therefore, the sale of the kit is a bundled transaction as defined in sec. 77.51(1f), Wis. Stats. (2009-10), unless it meets one of the exceptions provided in sec. 77.51(1f)(a) through (e), Wis. Stats. (2009-10).

Sales of contact lens travel kits do not meet the exception provided in secs. 77.51(1f)(a), Wis. Stats. (2009-10), because the price does not vary and is not negotiable based on the items selected by the purchaser.

Sales of the kits do not meet the exceptions provided in sec. 77.51(1f)(b) and (c), Wis. Stats. (2009-10), because there are no services included with the sale of the kit.

Sales of the kits do not meet the exception provided in sec. 77.51(1f)(d), Wis. Stats. (2009-10), because the transaction includes, among other things, drugs or medical supplies.

Section 77.51(1f)(e), Wis. Stats. (2009-10), may apply to the sale of the kits since the kits contain a drug (i.e., the contact lens solution). Therefore, if the seller's purchase price or sales price of the taxable tangible personal property (i.e., the contact lens solution) is no greater than 50% of the seller's total purchase price or sales price of all the products in the transaction (i.e., kit), the transaction is not a bundled transaction and is exempt from Wisconsin sales and use tax as provided in sec. 77.54(52), Wis. Stats. (2009-10).

Note: The following paragraph was changed on August 7, 2014 to reflect minor corrections.

However, if the seller's purchase price and sales price of the taxable tangible personal property included in the transaction (i.e., the contact lens solution) are greater than 50% of the seller's total purchase price and sales price, respectively, of all the products in the transaction (i.e., kit), the sale of the kit is a bundled transaction, and the entire selling price of the kit is subject to Wisconsin sales tax as provided in sec. 77.52(20), Wis. Stats. (2009-10).

Note: If the contact lens travel kit is purchased for non-corrective contact lenses, the entire sales price of the kit is taxable. There is no bundled transaction because all the items in the kit are taxable. The contact lens case and travel case would not qualify for exemption under sec. 77.54(22b), Wis. Stats. (2009-10), because although they are accessories, they are not accessories for a prosthetic device.

April 30, 2012