Tax Type
Retail Sales and Use Tax
Description
Medical, Dental, and Optical Supplies and Drugs; Equipment Supplier
Topic
Taxability of Persons and Transactions
Date Issued
06-29-1992
June 29, 1992
Re: Request for Ruling: Retail Sales & Use Tax
Dear******************
This will reply to your letter of April 22, 1992 in which you seek ruling on the applicability of the retail sales and use tax to your business, ******************(the "Taxpayer").
FACTS
The Taxpayer is primarily a durable medical equipment and oxygen supply business which also carries disposable medical supplies. You seek a ruling on the applicability of the tax to various items you sell.
RULING
Va. Code §58.1-608(A)(7)(b) provides an exemption from the retail sales and use tax for:
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- [w]heelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, and other durable medical equipment and devices, and related parts and supplies specifically designed for those products, insulin and insulin syringes, and equipment, devices or chemical reagents which may be used by a diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment which (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home.
- [w]heelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, and other durable medical equipment and devices, and related parts and supplies specifically designed for those products, insulin and insulin syringes, and equipment, devices or chemical reagents which may be used by a diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment which (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home.
Disposable medical supplies: The above Code section provides an exemption from the tax only for those supplies specifically designed for use with durable medical equipment. Thus, general purpose medical supplies such as tape, gauze, and dressings generally are taxable. I have enclosed a copy of P.D. 91-24 (3/11/91) which specifically addresses this issue as well as your question about the tax treatment of supplies used in parenteral or enteral therapy and ostomy supplies.
Adult diapers and bed pans: As specified above, in order for medical equipment to qualify for the exemption it must be equipment which "(i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose,...." In addition, for an item to be exempt, it must meet all of the four criteria. Since adult diapers are not designed for repeated use, they do not qualify for the exemption. However, bed pans meet all of the above specifications and thus qualify for the exemption.
Patient gowns and bathing suits for mastectomy patients: Patient gowns are capable of withstanding repeated use and are appropriate for use in the home. However, while they are useful in a medical setting they do not necessarily serve a medical purpose. In addition, they are not equipment, may be used for other than medical purposes and by a person in the absence of illness or injury, and thus do not Qualify for the exemption.
Bathing suits for mastectomy patients, likewise, are not equipment, are not primarily and customarily used to serve a medical purpose (they, instead, are designed to make mastectomy patients feel more comfortable about their physical appearance in a pool or beach setting) and are designed for use outside of the home. Accordingly, they do not qualify under the above exemption .
Billings to insurance companies: There is no exemption in the sales and use tax law for items sold by the Taxpayer to individuals but billed through a third party payor, such as an insurance company, medicare or medicaid. Thus, unless the items sold by the Taxpayer are exempt under Va. Code §58.1-608(A)(7)(b) as durable medical equipment or some other exemption, the tax applies. However, in the event that medicaid, medicare or some other government third party payor does not pay the tax to the Taxpayer, the Taxpayer should remit to the department 4%% of the amount reimbursed.
You should note that all purchases or leases of tangible personal property, whether durable medical equipment or otherwise, by a nonprofit hospital or nursing home are exempt from the tax. However, purchases or leases of durable medical equipment not on behalf of a specific patient by for-profit hospitals, clinics, physicians, etc. are subject to the tax. (See the enclosed copy of the Ruling of the Commissioner dated January 4, 1988 for more information on this issue.)
I trust this answers your questions but should you have any others, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/6127H
Rulings of the Tax Commissioner