Tax Type
Retail Sales and Use Tax
Description
Medical equipment and supplies
Topic
Exemptions
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
06-10-1993
June 10, 1993
Re: Request for Ruling: Retail Sales & Use Tax
Dear************
This will reply to your letter of October 1, 1992 in which you seek a ruling on the taxability of various medical items sold by your client, the "Taxpayer."
FACTS
The Taxpayer is in the business of selling various items of medical equipment and supplies for use by its customers in treating ailments or medical disabilities. You seek a ruling on the tax treatment of such items when purchased by individuals, doctors or medical facilities or when the cost of the items are reimbursed by Medicare or Medicaid.
Further, the Taxpayer enters into management various providers to supply medical equipment and supplies to the providers' customers. The Taxpayer seeks a ruling as to whether its management fee is subject to the tax.
RULING
I will address each of the Taxpayer's concerns individually below:
Durable Medical Equipment Generally
Va. Code §58.1-608(A)(7)(b) provides an exemption from the retail sales and use tax for:
-
- wheelchairs 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.
- wheelchairs 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.
Purchases by For Profit Medical Entities
Purchases or leases of durable medical equipment not on behalf of a specific patient by for-profit hospitals, clinics, homes for adults, physicians, etc., are subject to the tax. Purchases of durable medical equipment by a profit hospital, licensed nursing home, home for adults or by a licensed physician for use in his professional practice are deemed to be purchases on behalf of an individual only if purchased for a specific patient. Thus, items withdrawn from an inventory or items purchased in bulk, even if modified or fitted for a specific individual, are not deemed to be purchased on behalf of an individual.
Purchases by Nonprofit Medical Entities
All purchases or leases of tangible personal property (regardless of whether the item is durable medical equipment) by a nonprofit hospital or licensed nursing home are exempt from the tax pursuant to Va. Code §58.1-608(A)(7)(d), as indicated in P.D. 89-178 (5/31/89) and its attachments, copies enclosed. In addition, purchases of tangible personal property by certain nonprofit community health centers and specific nonprofit hospital cooperatives are exempt from the tax as provided in Va. Code §§ 58.1-608(A)(7)(e) and 58.1-608(A)(7)(1), copies enclosed.
Specific List of Equipment
The department, as part of its regulation interpreting this exemption, Virginia Regulation (VR) 630-10-35 (copy enclosed), has developed an exemplary, but not all inclusive, listing of exempt durable medical equipment. You will note that a number of the items in the list you provided to us are included within that listing. Accordingly, I will address the tax treatment of only those items which are not specifically listed in the regulation by category.
Additional Equipment
-
- Exempt
Glucose monitors and supplies (except batteries, which are taxable) [see P.D. 91-93 (5/29/91)]
Taxable
Incontinence items and gowns [see P.D. 92-118 (6/29/92)] Medical and surgical supplies, generally*
Bathroom accessories, except for shampoo trays and toilet safety frames (see also Bathroom equipment under Hospital Room Equipment)
- Exempt
Hospital Room Equipment
-
- Exempt
All hospital beds
Hospital bed mattresses & eggcrate
Alternate pressure pumps (provided they are for use only with alternate pressure pads)
Bathroom equipment such as shower seats, bath benches, raised toilet seats, toilet safety frames, shower grip bars
Phototherapy lights (to the extent they are used to serve a medical purpose and not for suntanning purposes)
Taxable
Air purifiers
Breast pumps [see P.D. 91-243 (10/8/91)]
Phototherapy supplies (i.e., eye patches, bulbs, covers, locks)
- Exempt
-
- Exempt
Enteral products sold specifically for use with enteral or parenteral feeding equipment [see P.D. 91-24 (3/11/91)] I.V. supplies such as catheters and tubing
- Exempt
-
- Taxable
Nutritional products sold as dietary supplements for oral consumption [see P.D. 91-24 (3/11/91)] I.V. supplies such as gloves, syringes' and surgical tape
- Taxable
Physical Therapy Equipment
-
- Exempt
TENS unit and muscle stimulators
TENS accessories (electrodes, wiring specifically for use with
TENS units)
Certain miscellaneous physical therapy items (i.e., wrist and ankle weights, shoulder braces, supports and braces when rehabilitative related) Continuous passive motion devices [see P.D. 89-56 (1/4/89] Pneumatic compression units and accessories
- Exempt
-
- Exempt
Stationary/portable gas and liquid oxygen systems
Gas oxygen refills (tanks)
APNEA monitors and accessories
CPAP and CPAP accessories
Respiratory accessories such as PFLEX, Peak Flow
Tracheostomy and suction supplies
Oximeter
Oxygen conserving devices
Oxygen [exempt under Va. Code §58.1-608(A)(7)(a)]
Taxable
Medical gases, such as compressed air, carbon dioxide, helium, nitrogen, nitrous oxide (laughing gas)
- Exempt
-
- Taxable
Pneumogram
Sterile Water
Sodium Chloride Solution
- Taxable
Medicine and Drugs
The Taxpayer also sells prescription medicines and drugs. I am enclosing a copy of a portion of the 1993 Sales and Use Tax Expenditure Study prepared by the department which explains the current exemption from the sales tax for medicines and drugs and the exemption for nonprescription drugs effective July 1, 1994. Further, it is my understanding that the Taxpayer engages in antibiotic therapy, hydration therapy, etc., as part of a home health care business. I am enclosing a copy of P.D. 92-172 (9/10/92) which addresses the tax treatment of medicines and drugs purchased for use under those circumstances.
Reimbursement by Third Parties
I am enclosing a copy of P.D. 91-43 (3/19/91) which explains the tax treatment of durable medical equipment when payment for the items is reimbursed by Medicare or Medicaid. You will note that the fact that payment for an item is reimbursed has no bearing on its tax status
Management Fees
The Taxpayer sells the equipment and supplies to the providers for resale and delivers it directly to the providers' customers. The Taxpayer then bills the customer, handles customer complaints, and remits the sales and rental charges due (including any applicable sales tax) directly to the providers. The Taxpayer receives a fee for the management services.
The management fee charged by the Taxpayer is exempt from the sales and use tax under Va. Code §58.1-608(A)(5)(a) which provides an exemption for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...."
The providers to whom the Taxpayer sells the equipment and supplies for resale may purchase such items under a resale exemption certificate. They are responsible for reporting and remitting the tax to the department for those transactions which do not qualify for exemption as explained above. However, in the event that the providers refuse to register as dealers with the department, the Taxpayer would be required to do so pursuant to Va. Code §58.1-612 B 7, copy enclosed.
Furthermore, the Taxpayer is required to register as a dealer and collect and remit the tax on all taxable sales of tangible personal property as explained herein.
I trust the above, along with the accompanying enclosures, answer all of your questions.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6456H
Rulings of the Tax Commissioner