Tax Type
Retail Sales and Use Tax
Description
Failure to remit use tax on various medical supplies
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
12-07-1982
December 7, 1982
Re: 58-1118 Application: Sales and Use Tax
Dear **************
This will refer to our meeting of August 31, 1982, in which you requested relief of use tax assessed ****** as the result of an audit.
Facts
******** (hereinafter******* ) is a group of physicians who operate a clinic for the treatment of orthopedic ailments. *********** was audited and held liable for failure to remit use tax on various medical supplies and appliances purchased for professional use, including crutches, braces, plaster, tape, and surgical implants.
******* contests this assessment, claiming that purchases of such medical supplies and appliances are exempt from tax under § 58-441.6(sl) of the Code of Virginia as such items were purchased for resale. This contention centers on the fact that such items are charged separately on a customer's bill.
Determination
Virginia Code § 58-441.6(sl) exempts from sales tax braces, crutches, and other orthopedic appliances "purchased by or on behalf of an individual for use by such individual." The Department has consistently interpreted this section as being inapplicable to purchases of such items by physicians, hospitals, and other "practitioners of the healing arts." The primary purpose of this section was to eliminate the requirement that the person medically in need of such items have a written prescription in order to purchase such items, or that such person be physically present at the time the purchase is made.
Physicians, surgeons, and other "practitioners of the healing arts" who purchase such items for use in performing their professional services are deemed to be the consumers of such property under § 1-83(b) of the Virginia Retail Sales and Use Tax Regulations. Further, § 1-47(d) of Virginia Retail Sales and Use Tax Regulations states that "unless a clinic is an integral part of a hospital conducted not for profit, sales to such a clinic are taxable." The Virginia Supreme Court concurred with this interpretation, holding that a hospital making bulk drug purchases for dispensation to patients was not entitled to a sales and use tax exemption in Commonwealth of Virginia v. Bluefield Sanitarium Inc. 216 Va. 686, 222 S.E. 2d 526 (1976). The essence of the decision was that a resale exemption per se was unavailable since the hospital, as purchaser, took possession of such property and thus made first use of the property in its role as a provider of medical services.
The purchase of braces, crutches, plaster, tape, surgical implants, and other orthopedic appliances and supplies by ********* constitute purchases of tangible personal property for use in performing professional services. Accordingly, ***** would be deemed the consumer of such property and should pay tax to its suppliers at that time of purchase or remit use tax if the supplier fails to collect tax due.
Therefore, based on the foregoing, I find no basis for relief of use tax assessed and paid.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner