US (Colorado) - Sales Tax Not Applicable on DNA Testing Services with Tangible Property

A private Company X, asked the Colorado Department of Revenue (Department) for an opinion on whether the sale of ancestral and health reports and saliva kits used to collect customers’ DNA are subject to sales tax in Colorado. 

Additionally, this company wanted to know if using DNA-collecting kits to generate ancestral and health reports for customers is subject to use tax in Colorado. 

The Department issued an official ruling clarifying this matter. 

Binding Ruling of the Department

In a private ruling binding on Company X, the Department stated that neither the sale of ancestral and health reports and DNA testing tools nor the use of DNA collecting kits for generating such reports are subject to sales tax.

The Department reached this conclusion based on the provided facts. Company X is an online provider of DNA testing services to individuals in the US and abroad. Consumers buy the DNA testing tools from the Company X website, collect the saliva used for testing on their own, and mail it to Company X. Once the DNA testing is completed, consumers can access personal results and report through the company's website.

An essential part of this process is that Company X pays the use tax on DNA tools in another US state with a distribution center.

The department found that providing DNA testing services is a so-called ‘true object’ for consumers and not the sale of tagine property such as saliva kits. Since DNA testing for ancestry and health history is not a service subject to the ale tax in Colorado, Company X does not have to collect and remit this tax.

However, Company X still must pay the use tax in Colorado for DNA collecting kits.

Conclusion

The Department's ruling is only binding for Company X since it is addressed to it. However, due to the specific legal system in the US, rulings like this can provide useful information for future similar issues. 

Source: Sales Tax Institute, Colorado Department of Revenue - Private Letter Ruling PLR-24-007