Tax Type
Retail Sales and Use Tax
Description
Purchases of dental supplies were made on behalf of an individual
Topic
Assessment
Exemptions
Date Issued
12-13-2004
December 13, 2004
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued by the Department for the period May 1998 through March 2004.
FACTS
The Taxpayer operates a dental practice in Virginia. The Taxpayer's dental practice includes providing dental implants for patients who have or need to replace missing teeth. The Taxpayer purchases dental implants for specific patients in order to perform the reconstructive dental surgery. A dental implant consists of two items: the implant and the supplies necessary for installation. Each dental implant that is purchased must be fitted, through CAT scans, radiology, and models, to the exact specifications of the patient. In addition to the dental implant, the Taxpayer purchases various parts, including screws and abutments, necessary for the installation of the dental implant.
The Taxpayer asserts that both the dental implants and the necessary installation parts are exempt under Va. Code § 58.1-609.7(2) (recodified as Va. Code § 58.1-609.10(10) effective July 1, 2004), contending that both the implant and the installation parts are purchased on behalf of a specific patient.
DETERMINATION
Code of Virginia § 58.1-609.10(10) provides, in part, an exemption from the retail sales and use tax for, "prosthetic devices, orthopedic appliances, catheters . . . [and] other durable medical equipment 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."
The taxable status of dental crowns and similar items is governed by the above exemption, which requires that these devices be purchased on behalf of an individual patient. A crown or similar item is produced from an impression taken of a patient's tooth. The impression takes on the inherent characteristics of the patient's tooth. A dental implant is produced and purchased for a specific patient and can only be used for the patient for whom it was ordered. Therefore, as concluded in the audit, the crowns and similar implant items purchased and used in the Taxpayer's dental practice are exempt from the retail sales and use tax.
Title 23 Virginia Administrative Code (VAC) 10-210-500 addresses purchases on behalf of an individual and provides that:
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- The tax applies to sales to a dentist by a dental laboratory or supplier of dentures, plates, braces and similar prosthetic devices, or the component parts thereof, unless such dentures, braces, etc. are purchased on behalf of a specific patient. If such items are purchased in bulk and then dispensed to a particular patient, the original purchase will be subject to the tax even if the items withdrawn from the bulk inventory are modified for a specific patient.
According to the auditor, each of the dental lab order forms for the dental implants, including dentures, bridges, and crowns, indicated a patient name on the invoice. The items listed on the invoice were purchased on behalf of an individual for use by such individual and were properly held exempt of the tax.
In addition, the Taxpayer purchases implant parts, including screws, abutments, and transfer pins, to be used for the installation of the implant. While these items are parts and supplies related to the dental implants, they are not ordered for a specific patient, but rather by size. In addition, the implant parts are not molded to the specific characteristics of a patient. The parts necessary for installation of a dental implant are fungibles and can be used by any number of patients. For example, if parts are purchased for the installation of a crown for patient A, but if patient A cancels the appointment these parts could be used for patient B whereas a dental crown can only be used for the patient for whom it was purchased.
The Department has previously ruled in Public Document 00-215 (12/7/00) that a taxpayer's purchase documentation (in this case the invoice) must include patient identification information at the time of purchase in order for the purchase to be deemed made on behalf of individuals. In the Taxpayer's case, the dental implant supply invoices did not include patient identification information. Furthermore, no evidence has been presented to prove that the purchases of supplies were made on behalf of an individual.
Based on this determination, the assessment is correct. An updated bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within thirty days from the date of the updated bill.
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Department's Tax Policy Library, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/52631i
Rulings of the Tax Commissioner