Tax Type
Retail Sales and Use Tax
Description
Medical, dental, and optical supplies and drugs; Ambulatory infusion pumps
Topic
Taxability of Persons and Transactions
Date Issued
04-18-1997
April 18, 1997
Re: Request for Ruling and § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This is in reply to your letters in which you seek clarification regarding the application of the sales and use tax to infusion pumps rented by ***********(the "Taxpayer"), and correction of tax assessed for the period September 1993 through September 1996. This correspondence will respond to both your ruling request and the audit appeal.
FACTS
The Taxpayer is a provider of life support and critical care equipment on a rental basis to hospitals, home care providers, and other healthcare facilities. The Taxpayer primarily rents ambulatory infusion pump devices ("pumps") to such organizations on behalf of individuals. As a result of the department's audit, the Taxpayer was assessed tax on untaxed rentals of the pumps due to a lack of documentation that such rentals were made to or on behalf of individuals.
The Taxpayer requests information on the proper application of the tax to the rental of the pumps and requests removal of the tax assessed in the audit on pumps rented to a major customer. The Taxpayer submits documentation received subsequent to the audit indicating the pumps were rented on behalf of specific patients.
DETERMINATION
Code of Virginia § 58.1-609.7(2), copy enclosed, provides an exemption from the sales and use tax for durable medical equipment (DME) and devices, and related parts and supplies specifically designed for those products 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.
In order to qualify as exempt DME, the product must meet the four criteria provided above and the products must be purchased by or on behalf of an individual for use by such individual. The fact that an item is purchased from a medical equipment supplier or is purchased on a physician's prescription is not dispositive of its exempt status.
The department has previously determined that ambulatory infusion pump devices qualify as exempt DME when purchased or leased by or on behalf of a specific individual. See Public Document (P.D.) 89-219 (8/4/89), copy enclosed. Consistent with P.D. 89-219, I find the Taxpayer's rentals of pumps as described in this case qualify for exemption when purchased for specific individuals.
Under Title 23 of the Virginia Administrative Code (VAC) 10-210-940, copy enclosed, for profit medical entities are subject to the tax on their purchases of DME, unless such purchases are specifically for an individual or patient. Because the department has not prescribed a certificate of exemption for use when DME is purchased on behalf of a specific individual, the seller of such products must obtain from its for-profit customers a signed statement certifying that the DME is purchased on behalf of a specific individual or patient pursuant to a physician's prescription or a for-profit hospital's work order. See P.D. 95-266 (10/17/95), copy enclosed.
Based on a review of the documentation submitted and P.D. 95-266, I will accept the documentation from the Taxpayer's customer as sufficient evidence that its rental of pumps were for specific patients and the tax on such pumps will be removed from the audit. For future audits, the Taxpayer must obtain a statement as required in P.D. 95-266 in order to rent pumps exempt of the tax to its customers.
The audit will be adjusted as set forth in this determination and the Taxpayer will receive a revised assessment including updated interest. The assessment should be paid within 30 days to avoid the accrual of additional interest charges. If you have additional questions, you may contact ****at ********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11874, 12015J
Rulings of the Tax Commissioner