Tax Type
Retail Sales and Use Tax
Description
Services; Professional or personal; Pneumogram interpretations
Topic
Taxability of Persons and Transactions
Date Issued
04-26-1994
April 26, 1994
Re: Request for Ruling: Retail Sales & Use Tax
Dear*********
This will reply to your letter of June 24, 1993 in which you request reconsideration of the department's ruling on the tax status of pneumograms. In the department's prior ruling to your company on behalf of your client (the "Taxpayer"), P.D. 93-144 (6/10/93), "pneumograms" was listed among taxable miscellaneous equipment/supplies.
FACTS
The Taxpayer provides various home health services, one of which is pneumogram interpretations. Pneumogram interpretations are conducted for customers with sleeping disorders, primarily infants who run a risk of sudden infant death syndrome. The Taxpayer monitors the customer and receives a printout chart which traces the breathes and heartbeats of the patient. The printout chart is then reviewed by a doctor who records his or her interpretations. The doctor charges the Taxpayer a fee for his services. The Taxpayer, in turn, charges its customers a fee for the pneumogram interpretation which covers the monitoring and the doctor's interpretation. You seek a ruling on the tax status of the fees charged by the Taxpayer for such pneumogram interpretations.
RULING
Va. Code §58.1-609.5(1) exempts from the retail sales and use tax "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made." Virginia Regulation (VR) 630-10-97.1 provides that in determining the tax status of a transaction which involves both the rendering of a service and the provision of tangible personal property, one must look to the "true object" of such. If the object of the transaction is to secure the services provided, then the transaction is not subject to the tax. However, if the object of the transaction is the actual tangible personal property, then the transaction is taxable.
In the instant case, while monitoring equipment may be provided to customers and the cost of which may be included in the monitoring fee, the "true object" of the transaction is the service provided by the Taxpayer. Accordingly, the charges by the Taxpayer for the pneumogram interpretations are nontaxable.
The department has received questions regarding its classification of sterile water and sodium chloride solutions as taxable in its prior determination to you as well. It is my understanding that some sterile water and sodium chloride solution brands contain the legend: "Caution: Federal Law Prohibits Dispensing Without a Prescription" and are deemed to be Schedule VI drugs as defined in Va. Code §54.1-3455. Brands which do not contain the legend are not considered Schedule VI drugs. Generally, however, such products are purchased only by health professionals.
Accordingly, I find that those brands which are considered Schedule VI drugs qualify for exemption from the retail sales and use tax as "controlled drugs" under Va. Code §58.1-609.7(1). Thus, they may be purchased exempt from the tax:
-
- for use by a licensed physician in his professional practice regardless of whether such practice is organized as a sole proprietorship, partnership or professional corporation, or any other type of corporation in which the shareholders and operators are all licensed physicians engaged in the practice of medicine, but excluding hospitals, nursing homes, clinics and similar corporations not otherwise exempt.
However, those brands which do not contain the legend and thus are not considered Schedule VI drugs do not qualify for exemption from the tax unless purchased by certain nonprofit medical entities which generally are exempt from the tax on their purchases of tangible personal property as explain in P.D. 93-144.
In addition, to the extent that sterile water and sodium chloride solutions are prescribed by a physician and purchased by an individual, such purchases would be exempt from the tax as a prescription medicine under Va. Code §58.1-609.7(1).
Should you have any other questions about these issues, please let me know.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7310H
Rulings of the Tax Commissioner