Tax Type
Retail Sales and Use Tax
Description
Manufactures, sells, and services automated external defibrillators
Topic
Appropriateness of Audit Methodology
Computation of Tax
Exemptions
Date Issued
02-01-2005
February 1, 2005
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you request a ruling on the taxability of ***** (the "Solutions") sold by the Taxpayer.
FACTS
The Taxpayer manufactures, sells, and services automated external defibrillators (AEDs). In addition, the Taxpayer provides medical assistance, data management software, leasing programs, training assistance, round-the-clock technical service, and liability insurance. The Taxpayer is now offering the Solutions for medical device training, support, and management of the AED.
The Solutions consists of the following components: Basic Medical Direction, Training, Automatic Supply Replenishment, Online Program Management, State Registration Services, Post-Event Download Services, Post-Event Rescuer Support, and an AED Clinical Helpline.
The Taxpayer is requesting a ruling on the taxability of the Solutions when billed with the AED, when each component of the Solutions is billed separately and when all of the components of the Solutions are bundled together on one bill.
RULING
Code of Virginia § 58.1-609.10 10 provides an exemption for prosthetic devices and other durable medical equipment and devices "when such items or parts are purchased by or on behalf of an individual for use by such individual." Title 23 of the Virginia Administrative Code (VAC) 10-210-940 defines "prosthetic devices" as "devices which replace a missing part or function of the body and shall include any supplies physically connected to such devices."
Based on the information provided, the AED manufactured by the Taxpayer appears to be similar in function to a cardiac pacemaker. The Department has previously addressed the taxability of the cardiac pacemaker in Public Document 88-265 (9/26/88). In the ruling, the Tax Commissioner determined that a cardiac pacemaker qualifies as an exempt prosthetic device because it is designed to regulate the heartbeat and performs a function of the body. Based on the prior ruling and Va. Code § 58.1-609.10 10, the AED qualifies as a prosthetic device and is exempt from retail sales and use tax when purchased by or on behalf of an individual for use by such individual.
The retail sales tax is imposed on the gross sales price of tangible personal property when sold at retail or distributed in Virginia. Va. Code § 58.1-602 defines "sales price" to mean:
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- the total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.
The services included in the Solutions package are provided in connection with the sale of the AED. In those instances in which the AED qualifies for exemption from the retail sales and use tax under Va. Code § 58.1-609.10 10, charges for services (including the Solutions) provided in connection with the sale of the AED are also exempt from the retail sales tax. The services provided through the Solutions package are exempt under each of the three billing methods: bundling of the components, billing each component separately, and billing the Solutions with the AED.
On the other hand, in those instances in which the AED does not qualify for exemption because it is not purchased by or on behalf of an individual, the sales tax applies to the sales price of the AED and any charges for services (including the Solutions) provided in connection with the AED, even if the charges for services are separately stated on the invoice.
This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library sections of the Department of Taxation's website, located at www.policylibrary.tax.virginia.gov. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
Kenneth W. Thorson
Tax Commissioner
- Sincerely,
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AR/52700.i
Rulings of the Tax Commissioner