Tax Type
Retail Sales and Use Tax
Description
Durable medical equipment
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
10-25-1984
October 25, 1984
Re: §58-1118 Application/Sales and Use Tax
Dear *******************
This will reply to your letter of September 4, 1984, in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
FACTS
***** (hereinafter *****) is engaged the sale of medical oxygen and the sale and lease of durable medical equipment. A recent audit of ***** revealed the failure to collect and remit the sales tax on sales and leases of tangible personal property obtained by customers under a physician's prescription.
***** contests this assessment, contending that the items included in the audit were exempt from the sales and use tax under the provisions of Virginia Code §§ 58-441.6(s) and (sl). In addition, ***** asserts that the department is stopped from the issuance of this assessment based upon its previously published position in a similar instance.
DETERMINATION
§ 58-441.6(s) of the Code of Virginia provides a sales and use tax exemption for the following items of tangible personal property:
Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescriptions or work orders of licensed physicians, dentists, optometrists, ophthalmologists, opticians, audiologists, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice.
Additionally, during the period of the instant audit, Virginia Code § 58-441.6(sl) provided a similar exemption for the following items:
Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, insulin and insulin syringes, when purchased by or on behalf of an individual for use by such individual.
It is asserted that ***** sales and leases of durable medical equipment, particularly oxygen equipment, were exempt from tax during the audit period under the provisions of the above statutes when purchased on a physician's prescription. However, a review of those statutes and applicable case law reveals that such items were not exempt from the tax even though purchased under physicians' prescriptions.
During the audit period in question, Virginia Code §§ 58-441.6(s) and (sl) clearly exempted from tax prescription "medicines" and "drugs" as well as many specific items. Traditionally, the department has deemed medical oxygen prescribed by a physician to be exempt from tax as a "medicine" or "drug"; however, until July 1, 1984, oxygen equipment and cylinders were deemed subject to tax when rented or sold separately from oxygen. This position was predicated upon the fact that such cylinders and equipment were not medicines or drugs, nor were they among the other items specifically exempted from tax. Similarly, items such as commode chairs and special use beds were deemed taxable inasmuch as such items were not among those specifically exempted from tax under Virginia Code §§ 58-441.6(s) and s(l).
This was the consistent position of the department since the inception of the sales and use tax and was based upon two principles of case law. First, a statute that is plain upon its face should be taken at face value, 17 Mich Jur 316 and second, statutes granting tax exemptions are construed strictly against the taxpayer, Commonwealth v. Community Motor Bus Company, 214 Va. 155, 198 S.E. 2d 619 (1973).
While the items included in this audit likely would be exempted from tax under the 1984 legislative amendment to Virginia Code § 58-441.6(sl), such amendment was not necessarily indicative of prior legislative intent. The 1984 amendment exempted "durable medical equipment and devices" from the tax effective July 1, 1984. In addition, the Virginia Supreme Court has held that a change in the law is normally presumed when new provisions are added to an existing statute by amendatory act Boyd v. Commonwealth, 215 Va. 16 (1975). Furthermore, the Court held in City of Richmond v. Sutherland, 114 Va. 688 (1913) that "[i]t must be presumed... that in making the amendment the legislature acted with full knowledge of, and in reference to, the existing law upon the same subject and the construction placed upon it by the courts" (emphasis added). Inasmuch as the Court has adopted a rule of strict construction with respect to tax exemptions, it must therefore be presumed that the 1984 statutory change was needed to exempt durable medical equipment and devices from the sales tax.
Based upon the foregoing, I must conclude that the tax was properly assessed upon the preponderance of the items included in this audit. However, purchases of canes and walkers included in the audit will be removed as these devices have been deemed exempt from tax under Virginia Code § 58-441.6(sl) when purchased by individuals for their own use.
With respect to your last assertion, I do not agree that the department is estopped from issuing an assessment to ***** based upon a 1978 letter from a departmental representative. The letter in question was not an official published ruling of the State Tax Commissioner and was not addressed to *****. Furthermore, the letter in question dealt only with "oxygen enrichers", not durable medical equipment in general. However, as ***** transacted business with the person to whom the 1978 letter was addressed and acted in reliance on that letter, I find basis for the removal of oxygen enrichers from the audit.
Therefore, the assessment issued to ***** will be revised to reflect the removal of canes, walkers, and oxygen enrichers from the audit. A revised notice of assessment will be issued shortly.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner