Tax Type
Retail Sales and Use Tax
Description
Medical Equipment and Devices; Sales by Nursing Home
Topic
Taxability of Persons and Transactions
Date Issued
03-19-1991
March 19, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********************
This will reply to your letter of March 16, 1990 requesting information on the application of the retail sales and use tax to sales by ***************(the "Taxpayer"), a subsidiary of *********** which operates a chain of nursing homes across the country.
FACTS
Through its nursing home based pharmacies, the Taxpayer sells drugs, enteral, urological, ostomy and other medically related products and supplies to nursing home residents. The Taxpayer requests a ruling whether liquid nutrition sold to residents under a physicians order and administered through enteral or parenteral feeding equipment qualifies for exemption from the sales and use tax.
The Taxpayer further asks whether products sold to nursing home residents qualify for the governmental exemption since the pharmacy typically bills directly through Medicare, Medicaid or some other third party payor.
RULING
The enclosed P.D. 91-24 (3/11/91) should answer the Taxpayer's question regarding the application of the tax to enteral and parenteral nutritional products.
In response to your second inquiry, there is no exemption in the sales and use tax law for items sold by the Taxpayer to individuals, but billed through a third party payor, such as Medicare or Medicaid. Thus, unless items sold by the Taxpayer are exempt under Va. Code §58.1-608(7)(a) as medicines and drugs, Va. Code §58.1-608(7)(b) as durable medical equipment, or some other exemption, the tax would apply even though Medicare, Medicaid, or some other federal or state funded insurance program is billed for the item.
The exemption at Va. Code §58.1-608(1)(e) for "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States" (emphasis added) does not apply in such situations, since the items sold are not in any sense used or consumed by the government.
In addition, under Va. Code §58.1-603, the sales tax applies to "the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this Commonwealth." Va. Code §58.1-602, defines the term "sale" as "any transfer of title or possession, or both, exchange, barter, lease or rental,...in any manner or by any means whatsoever, of tangible personal property...for a consideration." Thus, the application of the sales tax to transactions in which items are sold to individuals, but submitted to third party payor(s) for payment, is determined as of the time of sale to the individuals, and does not depend on the availability or source of reimbursement for the items sold.
I hope that the foregoing has responded to your questions, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner