Tax Type
Retail Sales and Use Tax
Description
Orthopedic Devices
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
09-19-2001
September 19, 2001
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This is in reply to your letter in which you request a ruling regarding the application of the retail sales and use tax to orthopedic appliances sold by ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a manufacturer of orthopedic implants (bone plates, bone nails, and bone pins) used in rehabilitative surgery. The orthopedic implants are metal devices that are surgically attached to broken bones to assist in the healing process. The Taxpayer sells the orthopedic implants to physicians and hospitals for use in their practice. The Taxpayer requests a ruling on the application of the sales tax to the following scenario.
The Taxpayer sells bulk quantities of orthopedic implants to a hospital. The hospital pays the applicable sales tax on the orthopedic implants and places them in its inventory for withdrawal on an "as-needed" basis. The hospital subsequently removes the orthopedic implants from its inventory for use in surgery for a specific patient. At a later date, the hospital replaces those orthopedic implants. In doing so, the hospital orders the replacements from the Taxpayer, using a purchase order with the patient's name. However, the patient in this scenario is the patient for whom the original orthopedic implants were used. The replacement orthopedic implants will be placed in the hospital's inventory and used as needed for another patient.
The Taxpayer requests a ruling on whether the sale of orthopedic implants in the above scenario qualifies for exemption from the sales and use tax under Code of Virginia § 58.1-609.7(2).
RULING
Code of Virginia § 58.1-609.7(2) provides, in part, an exemption from the sales and use tax for wheelchairs, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, insulin and insulin syringes, diabetic testing and blood or urine monitoring equipment and devices and other durable medical equipment and their related parts and supplies.
Title 23 of the Virginia Administrative Code (VAC) 10-210-940 (F)(G) addresses purchases on behalf of an individual and provides, in part, that, "in order to be deemed a purchase on behalf of an individual, the item must be specifically bought for the individual... if items are 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 addressed the taxability of durable medical equipment in Public Document 00-215 (12/7/00). In that case, the department ruled that the taxpayer's purchase of braces and collars in bulk and dispensed on an as-needed basis did not qualify for exemption.
Accordingly, the hospital's purchase of orthopedic implants to replace those previously withdrawn from inventory do not qualify for exemption, even if the hospital may be able to trace the orthopedic implants to a specific patient.
I trust this responds to your request. If you have any questions, you may contact ***** in the Appeals and Rulings Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
ARO/30041T
Rulings of the Tax Commissioner