Tax Type
Retail Sales and Use Tax
Description
Hospital beds; Durable medical equipment
Topic
Exemptions
Date Issued
03-16-2001
March 16, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period October 1994 through September 1997. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is an out-of-state entity that sells and leases specialized hospital beds and related products to acute care patients located in hospital intensive care units, medical and surgical floors, skilled nursing facilities, and their homes. The specialized hospital beds are prescribed for use by patients suffering from spinal cord injury, severe pulmonary complications, pressure ulceration, skin breakdown, wound infection, multiple trauma, severe burn, skin graph and severe pain. The beds are provided for specific patients on the prescription order of the patient's physician. The beds are installed by the Taxpayer's medical technicians who are responsible for setting the controls on the beds to the specifications of the patient's physician.
As a result of the department's audit, the Taxpayer was assessed use tax on the purchase of the beds and the related products, as the Taxpayer was deemed to provide a nontaxable service. The Taxpayer disagrees with the assessment and contends that the "true object" of its transaction is the sale of exempt durable medical equipment. To support its position, the Taxpayer cites a number of authorities and Public Document (P.D.) 89-178 (5/31/89).
DETERMINATION
True Object Test
Title 23 of the Virginia Administrative Code (VAC) 10-210-4040(D) applies the "true object" test in order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a retail sale. In this case, the Taxpayer provides the specialized hospital beds and related products for use in treating patients who are crippled or immobilized as a result of illness or severe trauma. The patient seeks the use of the bed, as it is designed to simulate natural body movements to facilitate the healing process. In addition, a medical technician is provided to ensure the proper installation of the bed and the setting of controls on the bed as directed by the patient's physician. In this case, the "true object" of the transaction is to secure the bed, and the installation and set-up services provided by the medical technician are incidental to the transaction. Therefore, the Taxpayer is making retail sales of the beds and related products.
Durable Medical Equipment
Code of Virginia § 58.1-609.7(2) provides an exemption from the sales and use tax for durable medical equipment that (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. In order to qualify for the exemption, the durable medical equipment must be purchased by or on behalf of an individual for use by such individual.
Title 23 VAC 10-210-940 provides a listing of the types of items that constitute durable medical equipment. Included in the listing are hospital beds, decubitis seating pads, bed pads, and alternating pressure pads.
In accordance with the above statute and the regulation, I find that the beds and related products provided by the Taxpayer constitute exempt durable medical equipment.
This is further supported by P.D. 89-178, which addressed a set of circumstances that are almost identical to this case. The taxpayer in the ruling designed, manufactured, and leased specialized hospital beds that were prescribed by physicians for specific patients. The beds were installed and monitored by the taxpayer's nurses and medical technicians. The beds met the four criteria stated above and were deemed exempt durable medical equipment when purchased or leased by or on behalf of a specific individual.
Based on all of the above, the assessment will be abated. If you have additional questions regarding this matter, you may contact **** in the Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16479J
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period October 1994 through September 1997. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is an out-of-state entity that sells and leases specialized hospital beds and related products to acute care patients located in hospital intensive care units, medical and surgical floors, skilled nursing facilities, and their homes. The specialized hospital beds are prescribed for use by patients suffering from spinal cord injury, severe pulmonary complications, pressure ulceration, skin breakdown, wound infection, multiple trauma, severe burn, skin graph and severe pain. The beds are provided for specific patients on the prescription order of the patient's physician. The beds are installed by the Taxpayer's medical technicians who are responsible for setting the controls on the beds to the specifications of the patient's physician.
As a result of the department's audit, the Taxpayer was assessed use tax on the purchase of the beds and the related products, as the Taxpayer was deemed to provide a nontaxable service. The Taxpayer disagrees with the assessment and contends that the "true object" of its transaction is the sale of exempt durable medical equipment. To support its position, the Taxpayer cites a number of authorities and Public Document (P.D.) 89-178 (5/31/89).
DETERMINATION
True Object Test
Title 23 of the Virginia Administrative Code (VAC) 10-210-4040(D) applies the "true object" test in order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a retail sale. In this case, the Taxpayer provides the specialized hospital beds and related products for use in treating patients who are crippled or immobilized as a result of illness or severe trauma. The patient seeks the use of the bed, as it is designed to simulate natural body movements to facilitate the healing process. In addition, a medical technician is provided to ensure the proper installation of the bed and the setting of controls on the bed as directed by the patient's physician. In this case, the "true object" of the transaction is to secure the bed, and the installation and set-up services provided by the medical technician are incidental to the transaction. Therefore, the Taxpayer is making retail sales of the beds and related products.
Durable Medical Equipment
Code of Virginia § 58.1-609.7(2) provides an exemption from the sales and use tax for durable medical equipment that (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. In order to qualify for the exemption, the durable medical equipment must be purchased by or on behalf of an individual for use by such individual.
Title 23 VAC 10-210-940 provides a listing of the types of items that constitute durable medical equipment. Included in the listing are hospital beds, decubitis seating pads, bed pads, and alternating pressure pads.
In accordance with the above statute and the regulation, I find that the beds and related products provided by the Taxpayer constitute exempt durable medical equipment.
This is further supported by P.D. 89-178, which addressed a set of circumstances that are almost identical to this case. The taxpayer in the ruling designed, manufactured, and leased specialized hospital beds that were prescribed by physicians for specific patients. The beds were installed and monitored by the taxpayer's nurses and medical technicians. The beds met the four criteria stated above and were deemed exempt durable medical equipment when purchased or leased by or on behalf of a specific individual.
Based on all of the above, the assessment will be abated. If you have additional questions regarding this matter, you may contact **** in the Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16479J
Related Documents
Rulings of the Tax Commissioner