November 14, 2014
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling regarding the application of the Virginia retail sales and use tax to products sold by ***** (the "Taxpayer') to Virginia customers.
FACTS
The Taxpayer is an out-of-state corporation that sells products that may be used to facilitate the mobility needs of persons with physical disabilities. These products include walk-in bathtubs, stairway wheelchair lifts, and outdoor ramps (hereinafter the "PMPs"). The PMPs sold by the Taxpayer are sold directly to Virginia customers. The PMPs are shipped by the Taxpayer to a Virginia warehouse and either delivered directly to the customer by a representative of the Taxpayer, or shipped directly to the Virginia customer by common carrier. In some cases a prescription or work-order from a licensed physician may be obtained by the customer, and in some cases the sales may be covered by Medicare or Medicaid. The Taxpayer requests a ruling as to whether sales of PMPs by the Taxpayer would qualify as exempt sales of durable medical equipment.
RULING
Virginia Code § 58.1-609.10 10 provides an exemption from the retail sales and use tax for durable medical equipment. Title 23 of the Virginia Administrative Code (VAC) 10-210-940 sets forth the Department's regulation as it relates to medicines, drugs, eyeglasses and related items. Subsection F of this regulation addresses durable medical equipment and states the following:
The tax does not apply to durable medical equipment purchased by or on behalf of an individual. Durable medical equipment is that which: (1) can withstand repeated use; (2) is primarily and customarily used to serve a medical purpose; (3) generally is not useful to a person in the absence of illness or injury; and (4) is appropriate for use in the home. In order for an item to be exempt from the tax, it must meet all of the above criteria. The fact that an item is purchased from a medical equipment supplier is not dispositive of its exempt status; the item must satisfy the definition of durable medical equipment.
As provided above, the first criteria to be met in order to qualify as exempt durable medical equipment is the equipment must be purchased by or on behalf of an individual. Subsection G of Title 23 VAC 10-210-940 defines the term "purchases on behalf of an individual" and provides, in part, that "the exemption for. . . durable medical equipment and devices and related parts and supplies specifically designed for such equipment extends to items purchased "on behalf of an individual for his use. In order to be deemed a purchase on behalf of an individual, the item must be specifically bought for the individual."
Based on the information provided in your letter, the PMPs sold by the Taxpayer meet the four criteria set forth in the statute and regulation to qualify as durable medical equipment, i.e., withstand repeated use, used to serve a medical purpose, not useful in the absence of illness or injury, and for use in the home. However, for the transaction to qualify for exemption, the purchase must be by or on behalf of an individual. The Department has consistently held that in order to determine if the purchase of durable medical equipment is by or on behalf of an individual, such purchase must be made on the prescription or work-order of a licensed physician. Therefore, in order to qualify as an exempt sale by the Taxpayer, the Taxpayer must maintain a copy of the prescription or work-order in their sales records to substantiate any exempt sale. Sales made without a prescription or work-order by a licensed physician would be subject to the Virginia retail sales and use tax.
I trust the foregoing responds to your inquiry. The Code of Virginia and regulation sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department's website. If you have any questions concerning this ruling, please contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5750265961.T