Tax Type
Retail Sales and Use Tax
Description
Sales to nursing home patients billed to Medicare or Medicaid
Topic
Exemptions
Property Subject to Tax
Date Issued
10-08-1991
October 8, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This will respond to your letter of July 15, 1991 seeking reconsideration of the department's prior ruling to**************(the "Taxpayer") regarding sales of certain products to patients of nursing homes which are billed directly to and paid by Medicare or Medicaid.
FACTS
The department previously ruled in P.D. 91-43 (March 19, 1991) that sales of certain items by the Taxpayer to individuals but billed through a third party payor, such as medicare or medicaid, do not qualify for exemption from the sales and use tax under the governmental exemption in Va. Code §58.1-608(1)(e). You cite a court case and a January 21, 1981 Ruling of the Commissioner to support your position that such sales should be exempt from the tax.
RULING
Va. Code §58.1-608(1)(e) provides an exemption for:
-
- [t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States...
- [t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States...
The facts of this case also differ from those in my 1981 ruling on government employee uniform allowances which you raised in support of your position. In that case, government employees furnished dealers with a voucher committing the federal government to pay for the uniforms. This is directly analogous to an official government purchase order and payment is clearly made by the federal government, thereby meeting the requirements of Virginia Regulation (VR) 630-10-45. This is also directly analogous to Forst in which the courts held that the tax could have been avoided if the federal government had obligated itself to the payment of its contractor's purchase orders.
In this case, however, the federal government has taken no similar step to obligate itself for payment to the Taxpayer. In fact, as in any insurance reimbursement transaction, Medicare and/or Medicaid can deny claims in whole or in part.
For the reasons set forth above I find no reason to revise my prior ruling. Thus, unless items sold by the Taxpayer are exempt under Va. Code §58.1-608(7)(a) as medicines and drugs, Va. Code §58.1-608(7)(b) as durable medical equipment, or some other exemption, the tax would apply even though Medicare, Medicaid, or some other federal or state-funded insurance program is billed for the item.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5384H
Rulings of the Tax Commissioner