Tax Type
Retail Sales and Use Tax
Description
Drug Control Act; exempt sale of a medical device
Topic
Exemptions
Date Issued
01-15-2003
January 15, 2003
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter of October 18, 2002, in which you request a ruling on the application of the retail sales and use tax to the sale of a medical device by ***** (the "Taxpayer").
FACTS
The Taxpayer is a manufacturer and distributor of medical devices. The Taxpayer distributes a joint fluid therapy device (the "Device") that is used in the treatment of pain in patients suffering from osteoarthritis of the knee. The Device consists of a pre-filled syringe that contains a liquid solution that is in part sodium hyaluronate (hyaluronan), a chemical ordinarily found in high amounts in the body's joint tissues and in the fluid that fills the joints. The hyaluronan solution in the Device is administered by injection into the patient's knee and replaces the naturally occurring hyaluronan that is lost due to osteoarthritis. The United States Food and Drug Administration (the "FDA") has classified the Device as a medical device. Federal law requires that the Device be sold or used on the order of a physician or other licensed practitioner.
The Taxpayer makes bulk sales of the Device to its customers that include hospitals, medical clinics, or other licensed medical practitioners. You request that the Department exempt the Taxpayer's sale of the Device as a drug prescribed by a licensed person.
RULING
Va. Code § 58.1-609.7(1) provides an exemption from the sales and use tax for medicines and drugs dispensed by or sold on prescriptions or work orders of licensed physicians and other licensed practitioners.
The exemption does not apply in this instance because the Device is not considered a drug by the FDA, but instead is classified as a medical device. The Virginia Board of Pharmacy concurs with the federal classification and deems the Device as a Schedule VI medical device under the Virginia Drug Control Act found in Va. Code § 54.1, Chapter 34. The exemption also does not apply here because the Device is sold by the Taxpayer in bulk quantities and not pursuant to a prescription or work order of a licensed practitioner, as required by the exemption.
Va. Code § 58.1-609.7(2) provides an exemption for "[w]heelchairs 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 ...when such items or parts are purchased by or on behalf of an individual for use by such individual ...." (Emphasis added.) Because the Taxpayer makes bulk sales of the Device to its customers, this exemption does not apply to such sales.
Notwithstanding the above, Va. Code § 58.1-609.7(4) authorizes the exempt sale of tangible personal property to nonprofit hospitals and licensed nonprofit nursing homes. Accordingly, the Taxpayer may make sales of its Device to these entities exempt of the tax. Although the Device is not a medicine or drug, it is tangible personal property and may, therefore, be sold exempt of the tax to the nonprofit hospitals and nonprofit licensed nursing homes. These entities must provide to the Taxpayer a Department issued Sales and Use Tax Certificate of Exemption letter. This letter verifies the entity's exempt status and includes the tax exempt number necessary for making tax exempt sales to such an entity.
The Code of Virginia sections cited, along with other reference documents, are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have additional questions, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
-
-
-
-
-
AR/43307J
Rulings of the Tax Commissioner