May 6, 2016
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling regarding the retail sales and use tax exemption afforded to durable medical equipment found under Va. Code § 58.1-609.10 10. I will apologize for the delay in responding to your request.
FACTS
***** (the "Taxpayer') provides prosthetic devices to amputation patients. In addition to the sale of prosthetic devices, the Taxpayer also provides related services to the patients that include consulting, evaluating, measuring, fitting, adjusting and replacing parts physically attached to the prosthetic device. While the Taxpayer provides prosthetic devices that are purchased on behalf of a specific individual, the Taxpayer also makes bulk purchases of parts and supplies used in fitting and adapting the patient to their prosthetic device. These bulk purchases include: (1) plastic, adaptors, pylons and other components physically attached to the prosthetic device, and (2) sleeves, shrinkers, socks and other components not physically attached to the prosthetic device. The Taxpayer also purchases liners used to cushion and protect the patient's residual limb from the prosthetic. The liners are purchased for an individual patient using a patient identifier on the purchase order. Liners become a part of the prosthetic device by way of a lock and pin suspension system.
The Taxpayer seeks clarification as to the retail sales and use tax application to the bulk purchases of component parts and supplies, and also to the liners which are purchased on behalf of an individual patient.
RULING
Virginia Code § 58.1-609.10 10 provides a 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 supplies specifically designed for those products; and insulin and insulin syringes, and equipment, devices or chemical reagents that may be used by a 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. Durable medical equipment is 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.
Title 23 of the Virginia Administrative Code (VAC) 10-210-940 interprets the exemption found in Va. Code § 58.1-609.10 10 and provides, in part, that "the tax does not apply to... prosthetic devices... and other durable medical equipment and devices, related parts and supplies specifically designed for such equipment when such items or parts are purchased by or on behalf of an individual using these items." Subsection G of this regulation addresses "purchases on behalf of an individual" and provides, in part, the following:
The exemption for... prosthetic devices... and durable medical equipment and devices and related parts and supplies specifically designed for such equipment extends to items purchased "on behalf of" an individual for his use. In order to be deemed a purchase on behalf of an individual, the item must be 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. [Emphasis added].
The regulation is clear that "bulk purchases" are taxable and items purchased in bulk are not "purchased on behalf of an individual." Keeping this in mind, I will address the Taxpayer questions below.
As provided in your letter, the Taxpayer is making bulk purchases of plastic, adaptors, pylons and other components that become attached to the prosthetic device, and bulk purchases of sleeves, shrinkers, socks and other components that do not attach to the prosthetic device. As provided in both Va. Code § 58.1-609.10 10 and Title 23 VAC 10-210-940, the prosthetic device and durable medical equipment exemption is dependent on such items being purchased by, or on behalf of, a specific individual or patient. Title 23 VAC 10-210-940 goes further to provide that bulk purchases of items that are not purchased for a specific patient are subject to the tax, regardless of the fact that the item may be attached to an exempt prosthetic device or durable medical equipment. For this reason, the items in question that the Taxpayer purchases in bulk quantities would be subject to the tax.
In regard to the liners, the Taxpayer provides that the liners are purchased for an individual or patient using a patient identifier on the purchase order. This being the case, the liners would be considered to be purchased by, or on behalf of, a specific individual or patient and would be exempt of the tax. All bulk purchases of liners not made on behalf of a specific individual would be taxable.
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.
I trust that the foregoing responds to your inquiry. If you have any questions concerning this ruling, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5988474578.T