Rulings of the Tax Commissioner

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to your letter in which you seek correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer"), for the period May 2008 through April 2011.

The Taxpayer is located outside Virginia and sells dental equipment, supplies and implants. As a result of the Department's audit, an assessment was issued for untaxed sales of durable medical equipment lacking documentation to support the exemption in Va. Code § 58.1-609.10 10.

The Taxpayer contests the tax assessed on sales of durable medical equipment and claims that the items are purchased for specific patients and exempt of the tax pursuant to Va. Code § 58.1-609.10 10. The Taxpayer states that it is in the process of gathering documentation to support the exempt sales of durable medical equipment.

Virginia Code § 58.1-609.10 10 provides, in part, an exemption from the retail sales and use tax for "prosthetic devices, orthopedic appliances, catheters . . . 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."

Title 23 of the Virginia Administrative Code 10-210-500 discusses the sales and use tax application to dentists, dental laboratories and dental supply houses. The regulation addresses purchases on behalf of an individual and provides that:

• • 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in bulk and then dispensed to a particular patient, the original purchase will be subject to the tax even if the items withdrawn from the bulk inventory are modified for a specific patient.

In this instance, the Taxpayer has not provided documentation to prove that the contested durable medical equipment is purchased on behalf of a specific patient. A member of the Appeals and Rulings staff has made several attempts to obtain such information; however, the Taxpayer has not provided the requested documentation.

Virginia Code § 58.1-205 1 deems any tax assessment issued by the Department as prima facie correct. This means that the burden of proof is upon the Taxpayer to prove that the assessment is incorrect. In the absence of documentation to verify that the contested sales of durable medical equipment are made on behalf of a specific patient, the Taxpayer has not met the burden of proof required by the statute. Accordingly, the contested sales will remain in the audit, unless the Taxpayer furnishes the requested documentation.

The Taxpayer will be allowed 30 days to provide the Department documentation to support exempt sales of durable medical equipment. The audit and assessment will be adjusted to remove the durable medical equipment that qualifies for exemption based on the results of the review. Please contact ***** at ***** or via e-mail at *****@tax.virginia.gov for instructions on submitting this documentation to the Department for review.

It is my understanding that the Department has applied overpayment money due the Taxpayer of ***** to the assessment as an offset payment. If no documentation is received within 30 days, the assessment will be considered correct and the Taxpayer will be mailed an updated bill with interest accrued to date. No additional interest will accrue provided the balance due on the updated bill is paid within 30 days from the date of the bill. Please remit payment to the: Virginia Department of Taxation, Attention: *****, 600 E. Main Street, 23^rd Floor, Richmond, Virginia, 23219. If you have any questions concerning payment of the assessment, you may contact ***** at *****.

The Code of Virginia sections and regulation cited are available on-line at
www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you have any questions about this response, you may contact ***** at *****.

• • • • • • • • Sincerely,

Craig M. Burns
Tax Commissioner



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