Tax Type
Retail Sales and Use Tax
Description
Collect/Remit sales tax on the sale of suture materials to healthcare practitioners
Topic
Exemptions
Medicine and Drugs
Nexus
Nonprofits
Date Issued
11-15-2012
November 15, 2012
Re: Ruling Request: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you request a ruling on the application of the retail sales and use tax to a number of suture materials sold by your client (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is located outside Virginia and is engaged in the retail sale of sutures, surgical mesh, surgical staple products, and other similar wound closure and healing materials (collectively, "suture materials"). The Taxpayer's suture materials are non-medicated or may be coated or infused with antiseptic or bacterial control products and remain in the body after surgery. The suture materials are labeled "Rx" and can only be purchased by licensed physicians or under a licensed physician's order. The Taxpayer sells the suture materials to healthcare practitioners such as physicians, hospitals, nursing homes, medical clinics, and surgical centers. The Taxpayer requests a ruling on whether it is required to collect and remit the sales tax on the sale of suture materials to healthcare practitioners in Virginia.
The Taxpayer's position is that suture materials coated or infused with antiseptic or bacterial control products and sold to healthcare practitioners are exempt pursuant to Va. Code § 58.1-609.10 9 because they are considered the sale of exempt medicine or controlled drugs. The Taxpayer maintains that the medicated suture materials are used to treat disease or injury by promoting quicker healing and preventing infection similar to exempt medicated bandages, gauze and swabs addressed in Public Document (P.D.) 99-32 (3/18/99).
The Taxpayer's position on non-medicated suture materials is that they are prosthetic devices exempt from the tax when purchased by healthcare practitioners on behalf of an individual. Further, the Taxpayer understands that the healthcare practitioners purchasing suture materials other than on behalf of an individual are required to pay use tax on such suture materials in accordance with Title 23 of the Virginia Administrative Code (VAC) 10-210-2060 B.
RULING
Medicines and Drugs
Virginia Code § 58.1-609.10 9 provides an exemption from the sales and use tax for medicines and drugs dispensed by or sold on prescriptions or work orders of licensed physicians and other licensed practitioners. The exemption does not apply in this instance because the suture materials coated or infused with antiseptic or bacterial control products are not considered a drug by the Federal Food and Drug Administration (FDA), but instead are classified by such agency as medical devices.
Medical Devices
Virginia Code § 58.1-609.10 10 provides an exemption for "prosthetic devices 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. Prosthetic devices are defined in Title 23 VAC 10-210-940 to mean "devices which replace a missing part or function of the body and shall include any supplies physically connected to such devices."
Title 23 VAC 10-210-940 G addresses purchases on behalf of an individual and states, "in order to be deemed a purchase on behalf of an individual, the item must be specifically bought for the individual. If items are purchased in bulk and then dispensed to individual patients, no exemption is applicable even if the item is modified or fitted for a specific individual."
The FDA classifies both medicated and non-medicated suture materials as medical devices. The Virginia Board of Pharmacy concurs with the federal classification and deems the suture materials as Schedule VI medical devices under the Virginia Drug Control Act found in Va. Code § 54.1, Chapter 34.
The Taxpayer may sell suture materials exempt of the tax when such product is purchased by or on behalf of an individual for use by such individual. Pursuant to P.D. 00-215 (12/7/00), a taxpayer's purchase documentation must include patient identification information at the time of purchase in order for the purchase to be deemed made on behalf of an individual. The sale of suture materials in bulk and suture materials not purchased on behalf of an individual for use by such individual are subject to the tax.
Nonprofit Organizations
Virginia Code § 58.1-609 11 provides an exemption that includes the sale of tangible personal property to nonprofit hospitals and nonprofit clinics (including nonprofit surgery centers). The Taxpayer may sell suture materials to these entities exempt of the tax, regardless if the product is sold in bulk, upon the Taxpayer's receipt of a Department issued Sales and Use Tax Certificate of Exemption letter. This letter verifies the entity's exempt status and includes the tax exempt number necessary for making tax exempt sales to such an entity.
Nexus
The Virginia Department of Taxation has no authority -to require out-of-state dealers to register for the collection and remittance of the retail sales and use tax unless they have sufficient nexus with the state. Virginia Code § 58.1-612 provides the criteria for determining whether a dealer has sufficient activity with Virginia to require registration. In the event the Taxpayer is not required to register with Virginia, the purchaser would be required to remit use tax directly to the Department on any taxable purchases of suture materials pursuant to Title 23 VAC 10-210-2060 B.
This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulations and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions about this ruling, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-4892367791.T
Rulings of the Tax Commissioner