April 28, 2015
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling on behalf of your client, ***** (the "Taxpayer"), regarding the application of the retail sales and use tax to their new cancer treatment therapy.
FACTS
The Taxpayer is a commercial-stage oncology company dedicated to the development and commercialization of tumor treating fields (TTFs). TTF therapy is for the treatment of cancer patients with solid tumors of the brain. TTF therapy is a low-toxicity treatment that uses low-intensity alternating electric fields to exert physical forces on the electrically charged components of dividing cancer cells, which is intended to disrupt cell division and cause cancer cell death.
The TTF therapy involves three main components. These components include: (i) an electronic field generator, connection cables, a portable battery, power supply, rack and a power cord; (ii) external transducer arrays that connect the electronic field generator to the human skull in order to deliver the electronic fields to the tumor; and (iii) ancillary items and accessories consisting of boxes, TTF bags, operations manual and self-exchange kits.
The TTF therapy is designed for continuous use throughout the day so that the patient can maintain a normal daily routine while receiving treatment for the disease. The transducer arrays are worn on the head and the electronic field generator is portable and battery powered so that it can be worn on the body using the TTF bag provided with the product.
The TTF therapy is obtained on the written prescription of a licensed physician, which is submitted to the Taxpayer's shipping facility located outside of Virginia. The prescription is filled and the components of the TTF therapy are shipped to the licensed physician or the closest local technical support staff specialist. At this point the patient receives an agreement to review and sign once he or she is trained on how to self-administer the therapy. The on-going care of the patient and the medical assessments are conducted by the attending physician.
The patients pay a monthly fee for the TTF therapy that is broken down into a charge for the lease of the electric field generator and other component parts, and a monthly fee to purchase additional transducer arrays. Around the clock technical support is included in the monthly fee.
The Taxpayer requests a ruling on the application of the Virginia retail sales and use tax to the sale of the TTF therapy. The Taxpayer believes the retail sale of the TTF qualifies for the exemption in Va. Code § 58.1-609.10 10 as either a prosthetic device or durable medical equipment, or both.
RULING
Virginia Code § 58.1-609.10 10 provides retail sales and use tax exemption for the following:
Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, other durable medical equipment and devices, and related parts and specifically designed for those products; and insulin and insulin syringes, and equipment, devices or chemical reagents that may be used by as diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by such individual.
Virginia Code § 58.1-609.10 10 defines the term durable medical equipment as "equipment that (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."
The TTF therapy devices in this case are designed to withstand repeated use, as they are used by the patient on a daily basis for the duration of the therapy period. The TTF devices are appropriate for use in the home and are used to serve a medical purpose, i.e., they replace a malfunctioning immune system. Finally, the TTF devices are not useful to a person with a properly functioning immune system.
Based on all of the above, I find that the TTF therapy devices manufactured by the Taxpayer qualify for the retail sales and use tax exemption found under Va. Code § 58.1-609.10 10 as durable medical equipment when purchased by, or on behalf of a specific individual. Bulk sales or leases of TTF therapy devices by the Taxpayer to for-profit hospitals, licensed physicians, etc., are subject to the sales tax.
I hope the foregoing responds to your inquiry. This ruling 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 section cited is available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section on the Department's website. If you should have any questions, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5917367603.T