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 "the taxpayers") were engaged in the sale of medical oxygen and the sale and lease of durable medical equipment. A recent audit of the taxpayers revealed the failure to collect and remit the sales tax on property sold or leased on the prescription of a physician.
The taxpayers contest this assessment, contending that the items included in the audit were exempt from the sales and use tax under the provisions of §§ 58-441.6(s) and (sl) of the Code of Virginia. In addition, the taxpayers assert that the department is estopped from the issuance of such an assessment based upon its previously published position on the taxability of such items.
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, Virginia Code § 58-441.6(sl) provides 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 the items included in the department's audit of the taxpayers were exempt from the tax during the audit period under the above statutes. Among the items taxed were oxygen concentrators, IPPB machines, oxygen cylinders, beds, bed rails, diapers, and other items of durable medical equipment and medical supplies, all of which were prescribed for the taxpayer's customers by physicians. However, a review of the above statutes and applicable case law reveals that an exemption was not available for such items even though purchased under the prescriptions of physicians.
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, 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 beds and bed rails were deemed taxable inasmuch as such items were not among those specifically exempted from tax under Virginia Code §§ 58-441.6(s) and (sl).
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 have been exempted from tax under a 1984 legislative amendment to Virginia Code § 58-441.6(sl), such amendment is not necessarily indicative of prior legislative intent. The 1984 amendment exempts "durable medical equipment and devices, and related parts and supplies specifically designed for those products" 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.
In addition, it has been asserted that the department is estopped from assessing the tax in this case as the department has previously published a ruling contrary to the audit findings here. I disagree; the letter in question was not a formal published ruling of the State Tax Commissioner and was not addressed to the taxpayers. Furthermore, the letter dealt only with devices known as "oxygen enrichers," not with the other various types of items sold and leased by the taxpayers. However, since the taxpayers transacted business with the person to whom the letter in question was addressed and acted in reliance on that letter, I find basis for the removal of oxygen concentrators from the instant audit.
I also find basis for the removal of nontaxed purchases of canes and walkers that were included in the audit. Such items have been considered exempt from the sales and use tax under the provisions of Virginia Code § 58-441.6) when purchased by or on behalf of individual for his own use.
Therefore, based upon the foregoing, the assessment issued to the taxpayers will be revised to reflect the removal of oxygen concentrators, canes, and walkers from the audit. A revised notice of assessment will be issued shortly.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner