June 26, 2018
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of your client, ***** (the “Taxpayer”) in which you request a ruling on the application of the retail sales and use tax to medical stents.
FACTS
The Taxpayer is an outpatient vascular care and ambulatory surgery center located in Virginia that specializes in minimally invasive techniques designed to treat and manage vascular conditions. The Taxpayer performs interventional radiology, sometimes in conjunction with dialysis treatments. With regard to dialysis, patients are referred to the Taxpayer when the blood vessels (arteries or veins) are too narrow to allow the rapid blood flow necessary for successful dialysis treatments. In these instances, the Taxpayer performs a percutaneous coronary intervention, also known as an angioplasty, or may use a stent to relieve narrowing of the blood vessels. The stents used by the Taxpayer are tiny wire mesh tubes that are inserted into blood vessels to (1) help keep the blood vessel open, (2) seal tears in the vessel, or (3) serve other purposes. According to the Taxpayer, in many instances, the stent functions as a blood vessel itself.
The Taxpayer requests a ruling on whether its purchases of stents qualify as nontaxable prosthetic devices under Title 23 of the Virginia Administrative Code (VAC) 10-210-940 F 1 (formerly 23 VAC 10-210-940 E 1). The Taxpayer also requests a ruling as to whether its purchases of stents with regard to hemodialysis patients qualify as nontaxable hemodialysis equipment and supplies, pursuant to Title 23 VAC 10-210940 G (formerly Title 23 VAC 10-210-940 E 2).
RULING
Prosthetic 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 are purchased by or on behalf of an individual for use by such individual."
Section A of Title 23 VAC 10-210-940, the regulation that addresses durable medical equipment, defines a prosthetic device as “any device that replaces a missing part or function of the body.” Title 23 VAC 10-210-940 F 2 explains that “implants satisfy the definition of prosthetic devices and may be purchased exempt of the tax when purchased by or on behalf of specific individuals.” In this instance, the stents are implants that replace the function of a blood vessel. Therefore, purchases of such stents on behalf of an individual patient would qualify as exempt durable medical equipment, pursuant to Virginia Code § 58.1-609.10 10 and Title 23 VAC 10-210-940.
The Taxpayer, however, purchases stents in bulk for the entirety of the medical practice. Due to the nature of the Taxpayer's practice, it is necessary to have stents of several sizes on-hand should a patient need them, and in order to ensure this, the Taxpayer purchases stents in bulk. This purchasing method precludes the Taxpayer from purchasing the stents on behalf of a specific patient. Title 23 VAC 10-210-940 F 5 provides that in order to be deemed a purchase on behalf of an individual, the item must be specifically purchased for that individual. If items are purchased in bulk and then dispensed to individual patients, the exemption does not apply, even if the items are modified or fitted for a specific individual. Therefore, the Taxpayer's bulk purchases of stents do not qualify as exempt durable medical equipment in accordance with the cited authorities.
Hemodialysis
Virginia Code § 58.1-609.10 11 provides an exemption for “drugs and supplies used in hemodialysis and peritoneal dialysis”. Title 23 VAC 10-210-940 G explains that:
Hemodialysis and peritoneal dialysis equipment, supplies, and drugs used in dialysis are not subject to the tax. This exemption is applicable regardless of the nature of the purchaser. Therefore, hemodialysis and peritoneal dialysis equipment, supplies, and drugs may be purchased exempt by physicians, individuals, for-profit and nonprofit hospitals, and other entities.
The stents purchased by the Taxpayer for use in hemodialysis would qualify as exempt hemodialysis equipment. The Taxpayer indicates that stents are purchased for procedures both related and unrelated to hemodialysis. The Taxpayer has no accounting method to distinguish when stents are purchased for hemodialysis and when they are purchased for other needs. As such, stents are purchased in bulk for the practice and subsequently withdrawn from a general inventory whenever the need for a stent arises. This inability to account for stents utilized in hemodialysis prevents the Taxpayer from being able to apply the exemption to purchases of stents that are ultimately used in hemodialysis.
CONCLUSION
Based on the information provided and the cited authorities, the Taxpayer's purchases of stents do not qualify for the statutory exemption for prosthetic devices or for hemodialysis equipment and supplies. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia and regulation sections cited, along with other reference documents, 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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1450.L