Tax Type
Retail Sales and Use Tax
Description
Oxygen equipment; Medical
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
02-22-1985
February 22, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of November 28, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
FACTS
****** (Taxpayer) is engaged in the sale and leasing of medical oxygen and related equipment and devices, including oxygen concentrators, cylinders, and regulators. A recent audit of the taxpayer produced an assessment for the failure to collect and remit the sales tax on sales and leases of oxygen equipment and devices.
The taxpayer contests the assessment issued by the department asserting that the items in question were exempt from the sales and use tax under the provisions of Virginia Code Sections 58-441.6(s) and (sl). Alternatively, the taxpayer asserts that tax assessed relating to oxygen concentrator sales and leases should be removed from its audit assessment based upon departmental action in similar applications for correction.
DETERMINATION
During the period the taxpayer was audited, Section 58-441.6(s) of the Code of Virginia (recodified as Virginia Code Section 58.1-608.21 effective January 1, 1985) provided a sales and use tax exemption for the following items of tangible personal property:
Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescriptions or work orders of licensed physicians, dentists, optometrists, opthamologists, opticians, audiologists, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice.
Additionally, Virginia Code Section 58-441.6(sl) (now Virginia Code Section 58.1-608.22) provided a similar exemption for the following items:
Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, insulin and insulin syringes, when purchased by or on behalf of an individual for use by such individual.
Oxygen equipment and devices are the items in question in the department's audit of the taxpayer. While medical oxygen has been considered by the department to be exempt as a medicine when purchased under a doctor's prescription, the taxpayer is correct in that oxygen cylinders and related equipment have been consistently deemed taxable by the department. This policy was predicted upon the fact that oxygen equipment and devices were not "medicines" or "drugs" nor were they among the items specifically exempted from tax in Virginia Code Section 58-441.6(sl).
While technology has advanced to the point where oxygen need not be provided by a cylinder, but can be produced and provided to a patient by an oxygen concentrator and other devices, the department is bound by the Virginia Supreme Court's doctrine of strict construction in the interpretation of sales and use tax exemptions (see Commonwealth v. Community Motor Bus, 214 V. 155, 198 S.E. 2d 619 (1973)). An exemption is not available to the taxpayer under such a strict reading of the above exemption statutes as oxygen equipment and devices are not specifically exempted under those statutes.
If purchased on or after July 1, 1984, the items included in the taxpayer's audit are considered exempt from the sales and use tax under a legislative amendment to Virginia Code Section 58-441.6(sl). As the amendment, exempting "durable medical equipment and devices" from the tax, was not retroactive, the change in the law has no effect on this audit assessment. A copy of Section 630-10-65 of the Virginia Retail Sales and Use Tax Regulations which describes the types of durable medical equipment now exempt from the tax is enclosed for the taxpayer's information.
While I feel that the law as it relates to oxygen equipment and devices was clear during the period of the taxpayer's audit, I find basis for the removal of oxygen concentrators from this audit as a substantial segment of the Virginia durable medical equipment industry operated in reliance on an unofficial 1978 departmental letter in which oxygen concentrators were deemed to be nontaxable.
Based upon the foregoing, the assessment issued to the taxpayer will be revised to reflect the removal of oxygen concentrators from the audit. However, the balance of the assessment, relating to items other than oxygen concentrators, will remain due and payable. Please advise if you desire a meeting to discuss this determination.
Sincerely,
W. H. Forst
Tax Commissioner
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of November 28, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
FACTS
****** (Taxpayer) is engaged in the sale and leasing of medical oxygen and related equipment and devices, including oxygen concentrators, cylinders, and regulators. A recent audit of the taxpayer produced an assessment for the failure to collect and remit the sales tax on sales and leases of oxygen equipment and devices.
The taxpayer contests the assessment issued by the department asserting that the items in question were exempt from the sales and use tax under the provisions of Virginia Code Sections 58-441.6(s) and (sl). Alternatively, the taxpayer asserts that tax assessed relating to oxygen concentrator sales and leases should be removed from its audit assessment based upon departmental action in similar applications for correction.
DETERMINATION
During the period the taxpayer was audited, Section 58-441.6(s) of the Code of Virginia (recodified as Virginia Code Section 58.1-608.21 effective January 1, 1985) provided a sales and use tax exemption for the following items of tangible personal property:
Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescriptions or work orders of licensed physicians, dentists, optometrists, opthamologists, opticians, audiologists, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice.
Additionally, Virginia Code Section 58-441.6(sl) (now Virginia Code Section 58.1-608.22) provided a similar exemption for the following items:
Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, insulin and insulin syringes, when purchased by or on behalf of an individual for use by such individual.
Oxygen equipment and devices are the items in question in the department's audit of the taxpayer. While medical oxygen has been considered by the department to be exempt as a medicine when purchased under a doctor's prescription, the taxpayer is correct in that oxygen cylinders and related equipment have been consistently deemed taxable by the department. This policy was predicted upon the fact that oxygen equipment and devices were not "medicines" or "drugs" nor were they among the items specifically exempted from tax in Virginia Code Section 58-441.6(sl).
While technology has advanced to the point where oxygen need not be provided by a cylinder, but can be produced and provided to a patient by an oxygen concentrator and other devices, the department is bound by the Virginia Supreme Court's doctrine of strict construction in the interpretation of sales and use tax exemptions (see Commonwealth v. Community Motor Bus, 214 V. 155, 198 S.E. 2d 619 (1973)). An exemption is not available to the taxpayer under such a strict reading of the above exemption statutes as oxygen equipment and devices are not specifically exempted under those statutes.
If purchased on or after July 1, 1984, the items included in the taxpayer's audit are considered exempt from the sales and use tax under a legislative amendment to Virginia Code Section 58-441.6(sl). As the amendment, exempting "durable medical equipment and devices" from the tax, was not retroactive, the change in the law has no effect on this audit assessment. A copy of Section 630-10-65 of the Virginia Retail Sales and Use Tax Regulations which describes the types of durable medical equipment now exempt from the tax is enclosed for the taxpayer's information.
While I feel that the law as it relates to oxygen equipment and devices was clear during the period of the taxpayer's audit, I find basis for the removal of oxygen concentrators from this audit as a substantial segment of the Virginia durable medical equipment industry operated in reliance on an unofficial 1978 departmental letter in which oxygen concentrators were deemed to be nontaxable.
Based upon the foregoing, the assessment issued to the taxpayer will be revised to reflect the removal of oxygen concentrators from the audit. However, the balance of the assessment, relating to items other than oxygen concentrators, will remain due and payable. Please advise if you desire a meeting to discuss this determination.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner