Tax Type
Retail Sales and Use Tax
Description
Oxygen and medical equipment; Physician's prescription
Topic
Taxability of Persons and Transactions
Date Issued
04-12-1985
April 15, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply, to your letter of February 20, 1985 in which you submit an application for relief of sales and use tax assessed to ******* as the result, of a recent audit.
FACTS
******* ("Taxpayer") is engaged in the sale of medical oxygen and the sale and lease of durable medical equipment. An audit of the taxpayer for the period from May 1, 1981 to May 31, 1984 produced an assessment for the failure to collect the sales tax on sales and leases of taxable tangible personal property obtained by customers under a physician=s prescription.
The taxpayer contests this assessment, asserting that it relied on information provided by the department to the firm's vice president and accountant in not collecting the sales tax on sales and leases when customers presented physicians' prescriptions. The taxpayer also asserts that the information provided it by the department was consistent with information provided another taxpayer operating a similar business and with information contained in a 1978 letter from the department to a medical oxygen equipment dealer, a copy of which was obtained by the taxpayer.
DETERMINATION
The applicable law in this case is found at Sections 58.1-608.21 and .22 of the Code of Virginia (Virginia Code Sections 58-441.6(s) and (sl) prior to January 1, 1985). During the audit period in question, Virginia Code Section 58-441.6(s) exempted the following items of tangible personal property from the sales and use tax:
Similarly, Virginia Code Section 58-441.6(sl) exempted these items during the audit period:
It is asserted that a departmental representative, apparently interpreting the above statutes, advised the taxpayer in 1980 that medical equipment purchased under a physician=s prescription was exempt from the sales and use tax. I regret that such information may have been provided; however, such information clearly would have been in conflict with, established departmental policy at that time.
During the audit period in question, Virginia Code Sections 58-441.6 (s) and (sl) clearly exempted from tax prescription, "medicines" and "drugs" as well as many specific items. Traditionally, the department has deemed medical oxygen prescribed by a physician to be exempt from tax as a "medicine" or "drug"; however, until July 1, 1984, oxygen equipment and cylinders were deemed subject to tax when rented or sold separately from oxygen. This position, was predicated upon the fact that such cylinders and equipment were not medicines or drugs, nor were they among the other items specifically exempted from tax. Similarly, items such as commode chairs and special use beds were deemed taxable inasmuch as such items were not among those specifically exempted from tax under Virginia Code Sections 58-441.6 (s) and (sl).
This was the consistent position the department since the inception of the sales and use tax and was based upon, two principles of case law. First, a statute that is plain upon its face should be taken at face value, 17 Mich Jur 316 and second, statutes granting tax exemptions are construed strictly against the taxpayer, Commonwealth v. Community Motor Bus Company, 214 Va. 155, 198 S.E. 2d 619 (1973).
While the items included in this audit likely would be exempted from tax under the 1984 legislative amendment to Virginia Code Section 58-441.6(sl), such amendment was not necessarily indicative of prior legislative intent. The 1984 amendment exempted "durable medical equipment and devices" from the tax effective July 1, 1984. In addition, the Virginia Supreme Court has held that a change in the law is normally presumed when new provisions are added to an existing statute by amendatory act Boyd v. Commonwealth, 215 Pa. 16 (1975). Furthermore, the Court held in City of Richmond v. Sutherland, 114 Va. 688 (1913) that "[i]t must be presumed...that in making the amendment the legislature acted with full knowledge of, and is reference to, the existing law upon the same subject and the construction placed upon it by the courts" (emphasis added). Inasmuch as the Court has adopted a rule of strict construction with respect to tax exemptions, it must therefore be presumed that the 1984 statutory change was needed to exempt durable medical equipment nod devices from the sales tax.
As the oral advice received from the department by the taxpayer was in obvious conflict with the law, I cannot conclude that the assessment issued to the taxpayer was erroneous, particularly since the department's official position with respect to medical equipment was published (and apparently widely distributed) on several occasions during the period covered by the department's audit, yet the taxpayer did not change its procedures. Since the taxpayer and the durable medical equipment industry apparently placed reliance on the 1978 letter in question, oxygen concentrator sales and leases have been removed from the taxpayer=s audit previously. However that letter, which supposedly was consistent with the oral advice received, only stated the author's opinion, that oxygen enrichers were exempt from the tax. The letter, which was not an official ruling, did not make any broad statement to the effect that medical equipment was exempt from the tax when purchased under a physician=s prescription.
Therefore, based upon the foregoing, I find no basis at this time for providing additional relief to the taxpayer is this case. However, I am willing to meet with representatives of the taxpayer to discuss this matter if so desired.
Sincerely,
W. H. Forst
Tax Commissioner
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply, to your letter of February 20, 1985 in which you submit an application for relief of sales and use tax assessed to ******* as the result, of a recent audit.
FACTS
******* ("Taxpayer") is engaged in the sale of medical oxygen and the sale and lease of durable medical equipment. An audit of the taxpayer for the period from May 1, 1981 to May 31, 1984 produced an assessment for the failure to collect the sales tax on sales and leases of taxable tangible personal property obtained by customers under a physician=s prescription.
The taxpayer contests this assessment, asserting that it relied on information provided by the department to the firm's vice president and accountant in not collecting the sales tax on sales and leases when customers presented physicians' prescriptions. The taxpayer also asserts that the information provided it by the department was consistent with information provided another taxpayer operating a similar business and with information contained in a 1978 letter from the department to a medical oxygen equipment dealer, a copy of which was obtained by the taxpayer.
DETERMINATION
The applicable law in this case is found at Sections 58.1-608.21 and .22 of the Code of Virginia (Virginia Code Sections 58-441.6(s) and (sl) prior to January 1, 1985). During the audit period in question, Virginia Code Section 58-441.6(s) exempted the following items of tangible personal property from the sales and use tax:
-
- 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.
Similarly, Virginia Code Section 58-441.6(sl) exempted these items during the audit period:
-
- 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.
It is asserted that a departmental representative, apparently interpreting the above statutes, advised the taxpayer in 1980 that medical equipment purchased under a physician=s prescription was exempt from the sales and use tax. I regret that such information may have been provided; however, such information clearly would have been in conflict with, established departmental policy at that time.
During the audit period in question, Virginia Code Sections 58-441.6 (s) and (sl) clearly exempted from tax prescription, "medicines" and "drugs" as well as many specific items. Traditionally, the department has deemed medical oxygen prescribed by a physician to be exempt from tax as a "medicine" or "drug"; however, until July 1, 1984, oxygen equipment and cylinders were deemed subject to tax when rented or sold separately from oxygen. This position, was predicated upon the fact that such cylinders and equipment were not medicines or drugs, nor were they among the other items specifically exempted from tax. Similarly, items such as commode chairs and special use beds were deemed taxable inasmuch as such items were not among those specifically exempted from tax under Virginia Code Sections 58-441.6 (s) and (sl).
This was the consistent position the department since the inception of the sales and use tax and was based upon, two principles of case law. First, a statute that is plain upon its face should be taken at face value, 17 Mich Jur 316 and second, statutes granting tax exemptions are construed strictly against the taxpayer, Commonwealth v. Community Motor Bus Company, 214 Va. 155, 198 S.E. 2d 619 (1973).
While the items included in this audit likely would be exempted from tax under the 1984 legislative amendment to Virginia Code Section 58-441.6(sl), such amendment was not necessarily indicative of prior legislative intent. The 1984 amendment exempted "durable medical equipment and devices" from the tax effective July 1, 1984. In addition, the Virginia Supreme Court has held that a change in the law is normally presumed when new provisions are added to an existing statute by amendatory act Boyd v. Commonwealth, 215 Pa. 16 (1975). Furthermore, the Court held in City of Richmond v. Sutherland, 114 Va. 688 (1913) that "[i]t must be presumed...that in making the amendment the legislature acted with full knowledge of, and is reference to, the existing law upon the same subject and the construction placed upon it by the courts" (emphasis added). Inasmuch as the Court has adopted a rule of strict construction with respect to tax exemptions, it must therefore be presumed that the 1984 statutory change was needed to exempt durable medical equipment nod devices from the sales tax.
As the oral advice received from the department by the taxpayer was in obvious conflict with the law, I cannot conclude that the assessment issued to the taxpayer was erroneous, particularly since the department's official position with respect to medical equipment was published (and apparently widely distributed) on several occasions during the period covered by the department's audit, yet the taxpayer did not change its procedures. Since the taxpayer and the durable medical equipment industry apparently placed reliance on the 1978 letter in question, oxygen concentrator sales and leases have been removed from the taxpayer=s audit previously. However that letter, which supposedly was consistent with the oral advice received, only stated the author's opinion, that oxygen enrichers were exempt from the tax. The letter, which was not an official ruling, did not make any broad statement to the effect that medical equipment was exempt from the tax when purchased under a physician=s prescription.
Therefore, based upon the foregoing, I find no basis at this time for providing additional relief to the taxpayer is this case. However, I am willing to meet with representatives of the taxpayer to discuss this matter if so desired.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner