Tax Type
Retail Sales and Use Tax
Description
Bulk purchases of braces and collars; Medical practice
Topic
Property Subject to Tax
Date Issued
12-07-2000
December 7, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek correction of a retail sales and use tax assessment issued to **** (the "Taxpayer"), for the period May 1994 through September 1999. I apologize for the delay in responding to your appeal.
The Taxpayer is a medical practice specializing in neurosurgery. The Taxpayer purchases braces and collars for use in the practice to treat patients. As a result of the department's audit, the auditor determined that the braces and collars were purchased in bulk quantities and assessed the tax on such purchases.
The Taxpayer protests the tax and believes the purchases qualify as exempt durable medical equipment (DME). The Taxpayer asserts that the braces and collars were made to fit specific individuals and were purchased for the exclusive use of such individuals. To support its position, the Taxpayer provides the names of the patients to whom the braces and collars were dispensed.
Code of Virginia § 58.1-609.7(2), copy enclosed, provides an exemption from the sales and use tax for "[wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, other durable medical equipment and devices, and related parts and supplies specifically designed for those products; and insulin and insulin syringes, and equipment, devices or chemical reagents which may be used by a diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment which (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home."
The regulation in Title 23 of the Virginia Administrative Code (VAC) 10-210-940, copy enclosed, provides that for-profit hospitals, nursing homes, homes for adults, and licensed physicians are subject to the tax on their purchases of DME, unless such purchases are specifically for an individual or patient. A purchase is deemed made on behalf of an individual if the item is specifically bought for the individual. If the item is purchased in bulk and then dispensed to individual patients, no exemption is applicable even if the item is modified or fitted for a specific individual. The department has addressed the taxability of DME in several rulings, a sampling of which is enclosed for your review.
According to the auditor's comments, the Taxpayer purchased braces and collars in bulk consistent with its anticipated need. The Taxpayer maintained an inventory of these items for dispensing on an as needed basis to patients. While, the Taxpayer may be able to trace the braces and collars to specific patients after the fact, this does not support the position that at the time of purchase, the braces and collars were bought for specific individuals. Therefore, the tax was properly assessed on the bulk purchases of the braces and collars. For future audits, the Taxpayer's purchase documentation must include patient identification information at the time of purchase in order for the purchase to be deemed made on behalf of individuals.
Based on the statute and the regulation, I do not find basis for correction of the assessment. If you have additional questions, please contact **** in the Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26192J
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek correction of a retail sales and use tax assessment issued to **** (the "Taxpayer"), for the period May 1994 through September 1999. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a medical practice specializing in neurosurgery. The Taxpayer purchases braces and collars for use in the practice to treat patients. As a result of the department's audit, the auditor determined that the braces and collars were purchased in bulk quantities and assessed the tax on such purchases.
The Taxpayer protests the tax and believes the purchases qualify as exempt durable medical equipment (DME). The Taxpayer asserts that the braces and collars were made to fit specific individuals and were purchased for the exclusive use of such individuals. To support its position, the Taxpayer provides the names of the patients to whom the braces and collars were dispensed.
DETERMINATION
Code of Virginia § 58.1-609.7(2), copy enclosed, provides an exemption from the sales and use tax for "[wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, other durable medical equipment and devices, and related parts and supplies specifically designed for those products; and insulin and insulin syringes, and equipment, devices or chemical reagents which may be used by a diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment which (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home."
The regulation in Title 23 of the Virginia Administrative Code (VAC) 10-210-940, copy enclosed, provides that for-profit hospitals, nursing homes, homes for adults, and licensed physicians are subject to the tax on their purchases of DME, unless such purchases are specifically for an individual or patient. A purchase is deemed made on behalf of an individual if the item is specifically bought for the individual. If the item is purchased in bulk and then dispensed to individual patients, no exemption is applicable even if the item is modified or fitted for a specific individual. The department has addressed the taxability of DME in several rulings, a sampling of which is enclosed for your review.
According to the auditor's comments, the Taxpayer purchased braces and collars in bulk consistent with its anticipated need. The Taxpayer maintained an inventory of these items for dispensing on an as needed basis to patients. While, the Taxpayer may be able to trace the braces and collars to specific patients after the fact, this does not support the position that at the time of purchase, the braces and collars were bought for specific individuals. Therefore, the tax was properly assessed on the bulk purchases of the braces and collars. For future audits, the Taxpayer's purchase documentation must include patient identification information at the time of purchase in order for the purchase to be deemed made on behalf of individuals.
Based on the statute and the regulation, I do not find basis for correction of the assessment. If you have additional questions, please contact **** in the Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26192J
Rulings of the Tax Commissioner