Are sales of surgical instruments and wound-closure supplies to doctors and veterinarians subject to Connecticut sales and use tax?

Plain-English summary

A medical-device company designed, made and sold surgical instruments — wound-closure products (devices that apply surgical staples or clips, plus the staples, clips, suture materials and staple-removers themselves) and laparoscopic-surgery instruments (which make incisions and provide the portals and tubes through which surgeons pass cameras, lighting and other instruments). It asked whether selling these products is subject to sales and use tax.

DRS's answer turned on who the buyer is.

• Sold to doctors and veterinarians: taxable. Professionals "engaged in the healing arts" are treated as consumers of the tangible personal property they buy to use in their practice, and they must pay sales and use tax on those purchases. DRS was explicit that it makes no difference whether the instrument is disposable or reusable, or whether the staples, clips or sutures are used internally or externally. Veterinarians are treated the same as doctors. So the company must charge sales tax on these sales.
• Sold to nonprofit charitable hospitals: exempt. Sales of tangible personal property to nonprofit charitable hospitals for the exclusive purposes of the institution are exempt under Conn. Gen. Stat. § 12-412(5). Purchases by certain health care centers defined in Chapter 698a are also exempt, under § 38a-207 and § 38a-224.

What this means for you

A doctor buying supplies is a taxable consumer, not a tax-free reseller

This is the key point. Even though these items go into patient care, the physician or veterinarian is the end consumer of the instruments and supplies and owes tax on the purchase. Don't assume "medical" equals "exempt" — the exemption here runs to the institution (a nonprofit charitable hospital or qualifying health care center), not to every medical buyer.

Disposable vs. reusable, internal vs. external — doesn't matter

DRS closed off the obvious distinctions. Whether the stapler is single-use or reusable, and whether the staple or suture stays inside the body or not, the sale to a doctor or vet is still taxable. The favorable treatment depends on the buyer's status, not the product's design.

Exemptions run to the institution — get the right documentation

If you sell to a nonprofit charitable hospital or a qualifying health care center, the sale can be exempt, but you need to confirm the buyer qualifies and keep the proper exemption documentation. And because the medical and hospital exemption rules have been revised since 1991, verify the current statute for your products and buyers.

Common questions

Q: Does a medical-device company charge sales tax when it sells to a doctor's office?
A: Yes. Under this ruling, doctors and veterinarians are consumers of the instruments and supplies they buy for their practice and owe sales and use tax, so the seller must charge it.

Q: Are the sales tax-free because the items are surgical/medical?
A: Not automatically. The exemption here is based on the buyer — a nonprofit charitable hospital (§ 12-412(5)) or a qualifying health care center (§§ 38a-207, 38a-224) — not on the medical nature of the product.

Q: Does it matter if the staples or sutures are disposable or stay inside the patient?
A: No. DRS said it makes no difference whether the items are disposable or reusable, or used internally or externally — sales to doctors and vets are taxable either way.

Q: When is a sale of these products exempt?
A: When it is made to a nonprofit charitable hospital for the institution's exclusive purposes, or to certain licensed health care centers defined in Chapter 698a. Confirm the buyer qualifies and keep exemption documentation.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-412(5) — sales of tangible personal property to nonprofit charitable hospitals for the institution's exclusive purposes are exempt
• Conn. Gen. Stat. § 38a-207 and § 38a-224 — exemptions for purchases by certain health care centers (Chapter 698a)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 91-12

Original ruling text

Ruling 91-12, Medical Equipment

Ruling 91-12

Medical Equipment

FACTS:

Company designs, manufactures and markets various surgical instruments primarily related to two major surgical areas: wound closure and laparoscopic surgery.

Products used in wound closure include both disposable and non-disposable instruments which apply surgical staples or clips and may, prospectively include suture materials applied to internal or external tissue or bodily parts. Such products may consist of both a cartridge device housing staples or clips and a delivery mechanism in the nature of a staple "gun" or clip applier.

Additional products consist of the wound closure material itself, i.e. the surgical staples, clips or suture materials, as well as products used to remove the staples.

Products used in laparoscopic surgery consist of instruments which make incisions, provide portals or tubes through which surgeons pass lighting and camera devices as well as surgical instruments to perform surgical procedure, and support the laparoscopic surgical procedures.

ISSUES:

Are the sales of the products described herein used in wound closure and in laparoscopic surgery subject to sales and use taxes.

RULING:

Company must charge sales tax on its products sold to doctors and veterinarians. The professions engaged in the healing arts are consumers of tangible personal property which they purchase for use in the exercise of their profession and must pay sales and use tax on such purchases. Veterinarians are treated in a similar manner. It makes no difference whether the instruments used by doctors or veterinarians are disposable or reusable or whether the staples, clips or sutures are used internally or externally.

The sale of tangible personal property to nonprofit charitable hospitals for the exclusive purposes of such institutions are exempt from sales and use taxes under Conn. Gen. Stat. §12-412(5). In addition, purchases by certain health care centers defined in Chapter 698a of the General Statutes are exempted under Conn. Gen. Stat. §38a-207 and §38a-224.

LEGAL DIVISION

April 8, 1991