Tax Type
Retail Sales and Use Tax
Description
Supplements qualify as an exempt medical product pursuant to Va. Code
Topic
Assessment
Exemptions
Date Issued
09-16-2004
September 16, 2004
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 assessment issued to ***** (the "Taxpayer") for the period November 1999 through June 2002. I apologize for the Department's delay in responding to your letter.
FACTS
The Taxpayer sells medical products and durable medical equipment. Under a Department of Medical Assistance Services (DMAS) authorized program, the Taxpayer sold nutritional supplements ("supplements") to terminally ill individuals for oral consumption. The supplements were dispensed pursuant to a physician's prescription order and paid for by DMAS. The Taxpayer has been audited and assessed tax on its untaxed sales of the supplements.
The Taxpayer protests the tax and contends that the supplements meet the DMAS coverage criteria for use in the treatment of a medical condition and, therefore, are a qualifying medical product as set out in the exemption provided in Va. Code § 58.1-609.7(20). In the alternative, and in accordance with the Department's Tax Bulletin 98-4 (5/15/98), the Taxpayer believes that the vitamin and mineral content of the supplements dispensed by a physician's prescription qualifies them for the nonprescription drug exemption in Va. Code § 58.1-609.7(15).
DETERMINATION
Medical Products/DMAS Exemption
Virginia Code § 58.1-609.7(20) provides an exemption for medical products and supplies, which are otherwise taxable, such as bandages, gauze dressings, incontinence products and wound care products, when purchased by a Medicaid recipient through a Department of Medical Assistance Services provider agreement. The exemption applies to any type of medical product or supply, incontinence or wound care product provided payment for such is made by DMAS.
Under DMAS coverage guidelines, the supplements at issue are paid for by DMAS when provided to Medicaid recipients as the sole source form of nutrition and a necessity for medical treatment. The coverage is available regardless of whether the supplements are administered orally or through a feeding tube. In accordance with the DMAS guidelines and consistent with the intent of the exemption, I agree that the supplements in this instance qualify for the above exemption.
Nonprescription Drug Exemption
While I agree the sales at issue qualify for exemption pursuant to Va. Code § 58.1-609.7(20), I believe it is important to address your position regarding the application of the nonprescription drug exemption. It is my understanding that the Taxpayer no longer sells the supplements at issue under the DMAS program.
Virginia Code § 58.1-609.7(15) provides an exemption for nonprescription drugs and proprietary medicines. Nonprescription drugs are those substances containing medicines or drugs for which no prescription is required and which are generally sold for internal or topical use in the cure, mitigation, treatment, or prevention of disease in human beings. Proprietary medicines are nonprescription drugs sold to the general public under the brand name or trade name of the manufacturer and that do not contain any controlled substance or marijuana.
The Department issued Tax Bulletin 98-4 (5/15/98), which addresses the application of the exemption. The Tax Bulletin provides that the exemption does not apply to vitamins and mineral concentrates sold as dietary supplements (except when sold pursuant to a written prescription by a licensed physician). In this case, the labeling of the supplements does not support that they are vitamins or mineral concentrates. Instead, they are dietary supplements that are fortified with vitamins and minerals. Based on the exemption statute and the Department's Tax Bulletin, the supplements do not qualify for the nonprescription drug exemption.
Conclusion
In accordance with the determination that the supplements qualify as an exempt medical product pursuant to Va. Code § 58.1-609.7(20), the assessment issued to the Taxpayer will be abated.
The Virginia Code sections and Tax Bulletin cited are available on-line 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 *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/44371J
Rulings of the Tax Commissioner