Tax Type
Retail Sales and Use Tax
Description
Medical, dental, and optical supplies and drugs; Collagen implants
Topic
Taxability of Persons and Transactions
Date Issued
12-28-1994
December 28, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear
This will reply to your letter of January 25, 1994 in which you request a refund of sales and use tax assessed to your client,******************(the "Taxpayer), for the period April 1987 through March 1993.
FACTS
The Taxpayer is a physicians' group specializing in problems of the ear, nose and throat including cosmetic and reconstructive surgery. In performing such surgeries, the Taxpayer uses collagen implants which are purchased in bulk quantities and administered on an as needed basis. As a result of an audit, the Taxpayer was assessed tax on its purchases of collagen implants. The Taxpayer protests the tax and contends that the collagen implants are considered controlled drugs according the Virginia Drug Control Act provided in Code of Virginia §54.1-3455. As such, the purchases qualify for exemption from the sales tax under Code of Virginia §58.1609.7(1).
DETERMINATION
Code of Virginia § 58.1-609.7(1) provides an exemption from the sales and use tax for controlled drugs purchased by a physician for use in his professional practice. The exemption applies to controlled drugs contained in Schedules I through Vl of the Virginia Drug Control Act, but (as stated in Virginia Regulation (VR) 630-10-65 (B)(2)) not to devices. Code of Virginia § 58.1-609.7(2) provides an exemption for certain medical devices when purchased by or on behalf of an individual for use by such individual.
The department has recently issued a ruling regarding collagen implants and their use in the repair and replacement of body tissue by physicians. According to P.D. 94-109 (4113/94), copy enclosed, collagen implants are classified as Group 3 medical device implants by the Federal Drug Administration. Therefore, the collagen implants are categorized as Schedule Vl devices and not controlled drugs. The taxpayer in the ruling purchased its collagen implants in bulk and therefore did not qualify for exemption. Likewise, in the present case, the Taxpayer's purchases of collagen in bulk quantities for use on an as needed basis also do not qualify for exemption from the tax.
Based on the foregoing, the Taxpayer is not entitled to a refund of tax and interest previously paid. The Taxpayer is required to pay the tax on its purchases of collagen implants in accordance with the instructions provided by the auditor.
If you have additional questions, please contact
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7648J
Rulings of the Tax Commissioner