Were reprocessed medical devices labeled for physician-order and single use exempt from Florida sales tax?

Plain-English summary

The taxpayer reprocessed, repaired, and refurbished many types of medical devices, either for a customer fee or for resale as certified pre-owned products. Every product bore an FDA-approved label restricting sale to a physician's order and identifying the reprocessed device for single use.

Florida ruled that the products were exempt from sales tax. They were medical devices dispensed only by a licensed practitioner's order and intended for use on a single patient before any later reprocessing.

No purchaser exemption certificate was required under the cited rule, but the seller had to maintain records showing that every exempt product carried the qualifying label.

What this means for you

Reprocessing does not automatically make a device reusable for tax purposes. The ruling focused on the device's single-patient use between processing cycles, federal sales restriction, and label evidence.

Common questions

Were the reprocessed products taxable? No, under the stated labeling and use facts.

Could a device be reprocessed more than once? The taxpayer represented that some products could undergo validated reprocessing cycles, but each released device was labeled for single use.

What documentation was required? Records proving that each product bore the physician-order and single-use label.

Citations and references

• Fla. Stat. § 212.08(2) and Fla. Admin. Code r. 12A-1.020(6), as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-046

Original ruling text

SUMMARY
QUESTION:
Are the sales of medical products which bear the label, “Caution: Federal Law restricts
this device for sale by or on the order of a physician. . . .Reprocessed device for single
use” subject to tax in Florida?
ANSWER:
The sale of medical products which bear the label, “Caution: Federal Law restricts this
device for sale by or on the order of a physician. . . .Reprocessed device for single use”
meet the requirements for exemption found in s. 212.08(2), F.S., and would therefore not
be subject to tax in Florida?
November 5, 2010
XXX
Re:

Technical Assistance Advisement 10A-046
Florida Sales and Use Tax
Medical Products
Section: 212.08, Florida Statute (F.S.)
Rule: 12A-1.020, Florida Administrative Code (F.A.C.)
Petitioner: XXX (“Taxpayer”)

Dear XXX:
This letter is a response to your petition dated April 28, 2010, for the Department's
issuance of a Technical Assistance Advisement ("TAA") concerning the above
referenced petitioner and matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite criteria set forth in Chapter 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under the
authority of Section 213.22, F.S.
FACTS
Taxpayer is in the business of reprocessing, repairing, and refurbishing medical devices
and equipment (“Products”). Taxpayer may reprocess a specific Product for a customer
for a fee, or customers may purchase certified pre-owned Products from Taxpayer. Every
Product sold bears the following label: “Caution: Federal Law restricts this device for
sale by or on the order of a physician. . . .Reprocessed device for single use.” The U. S.
Food and Drug Administration (FDA) views the Products as “single-patient use” as
opposed to “reusable” products, because the Products may only be used one time before
reprocessing again.

Technical Assistance Advisement
Page 2
Taxpayer’s validated processes ensure that a reprocessed Product is substantially
equivalent to a new product. Taxpayer’s processes are reviewed and cleared by the FDA.
Taxpayer’s processes are far more thorough and controlled than those performed in
sterile departments in hospitals. For example, each sterility cycle has biologic indicators
which verify a product is sterilized before any product is released for shipment. Many
sterile departments in hospitals merely use a tape which simply indicates the exposure to
Ethylene Oxide gas with no certainty of sterility.
Taxpayer’s website indicates that the maximum number of times it will reprocess any
Product is five times. The actual number of times a device can be reprocessed is
supported by successful validation testing and is dependent upon factors including device
construction, material composition, and handling by the clinician. In order to maximize
The number of reprocessing cycles, Taxpayer uses proprietary collection tools,
preliminary decontamination at the facility, and leading edge technologies to clean
Products.
Taxpayer’s website also states that state-of-the-art reprocessing technologies enable its
company to supply over 8,000 different Class I and Class II single-patient use devices in
all Operating Room departments, as well as for the Gastrointestinal and
Electrophysiology/Catheter labs. Single patient use items which cannot be cleaned,
sterilized, or ensured to be functionally equivalent to new devices are not reprocessed by
Taxpayer. As a current policy, Taxpayer does not reprocess Class III implantable
devices.
REQUESTED ADVISEMENTS
Taxpayer is seeking guidance on the taxability of its Products, all of which bear the label,
“Caution: Federal Law restricts this device for sale by or on the order of a physician. . . .
Reprocessed device for single use:” The Products include the following types of devices:
arthroscopic shavers, arthroscopic probes, balloon inflation, bed check devices, biopsy
forceps, burrs, cannula sets, carpal tunnel blades, cartilage knives, catheters, chest
retractor, chisels, compression sleeves, drill bits, electrodes, external fixation devices,
ENT shavers, EP/ablation cables, femoral compression devices, fiber optic light panel,
guidewires, heart stabilizers and positioners, laparoscopic instruments, laser probe, masks
(laryngeal/otopharyngeal), multiclip appliers, phaso tips, pulse oxisensor, rasps, reamers,
saw blades, scissor tips, stone retrieval baskets, taps, trocars, tourniquet cuffs, and
ultrasonic scalpels.

Technical Assistance Advisement
Page 3
APPLICABLE LAW AND DISCUSSION
Section 212.08(2), F.S., provides in part:
(2) EXEMPTIONS; MEDICAL.-(a) There shall be exempt from the tax imposed by this chapter any medical
products and supplies or medicine dispensed according to an individual
prescription or prescriptions written by a prescriber authorized by law to prescribe
medicinal drugs . . . .
Rule 12A-1.020, F.A.C., provides in pertinent part:
(6) MEDICAL PRODUCTS, SUPPLIES, OR DEVICES.
(a) “Medical products, supplies, or devices” are any products, supplies, or devices
that are intended or designed to be used for a medical purpose to treat, prevent, or
diagnose human disease, illness, or injury. The purpose is assigned to a product,
supply, or device by its label or its general instructions for use.
(b) Unless specifically exempt, products, supplies, or devices sold to hospitals and
healthcare entities or to licensed practitioners are subject to tax. . . .
(c)1. Medical products, supplies, or devices sold to hospitals, healthcare entities, or
licensed practitioners are exempt when:
a. The medical product, supply, or device must be dispensed under federal or state
law only by the prescription or order of a licensed practitioner; and
b. The medical product, supply, or device is intended for use on a single patient and is
not intended to be reusable.

2. Medical trays and surgical or procedure kits containing medical products, supplies,
   or devices that are labeled to be dispensed only by the prescription or order of a
   licensed practitioner and are intended for use on a single patient are exempt, even
   when the medical tray or kit contains one or more items that, when sold separately,
   would be subject to tax.
3. No exemption certificate or Annual Resale Certificate is required to be obtained by
   the selling dealer from the purchasing hospital, healthcare entity, or licensed
   practitioner to document exempt sales of medical products, supplies, or devices that
   are labeled to be dispensed only by the prescription or order of a licensed practitioner.
   However, selling dealers are required to maintain documents in their records

Technical Assistance Advisement
Page 4
evidencing that the medical product, supply, or device sold to a hospital, healthcare
entity, or licensed practitioner is labeled to be dispensed only by the prescription or
order of a licensed practitioner. . . .
Unless a specific exemption applies, Section 212.05, F.S., provides it is the legislative
intent that every person is exercising a taxable privilege that engages in the business of
selling tangible personal property at retail in this state. For exercising such a privilege, a
tax is levied on each taxable transaction or incident. The tax is due and payable at the
rate of 6 percent, plus any applicable surtaxes imposed under Section 212.055, F.S., on
the total consideration received for each item or article of tangible personal property
when sold at retail in this state.
Section 212.08(2)(a), F.S., provides a specific exemption for certain medical products
and supplies when such medical products and supplies are dispensed according to a
prescription written by a prescriber authorized by law to prescribe medicinal drugs.
Items are also exempt if included on Form DR-46NT, Nontaxable Medical and General
Grocery List, as approved by the Department of Health.
Rule 12A-1.020(6), F.A.C., provides that the sales of medical products, supplies, or
devices to hospitals, healthcare entities, or licensed practitioners are exempt when: 1)
dispensed under federal or state law only by the prescription or order of a licensed
practitioner; and 2) intended for use on a single patient and not intended to be reusable.
Here, Taxpayer’s Products bear an FDA approved label which reads, “Caution: Federal
Law restricts this device for sale by or on the order of a physician. . . .Reprocessed device
for single use.”
CONCLUSION
The Products under advisement meet the requirements for exemption and would not be
subject to tax.
Please note, however, that Taxpayer is required to maintain documents in its records
evidencing that each of the Products bears the label, “Caution: Federal Law restricts this
device for sale by or on the order of a physician. . . . Reprocessed device for single use.”
This response constitutes a Technical Assistance Advisement under S. 213.22, F.S.,
which is binding on the Department only under the facts and circumstances described in
the request for this advice, as specified in S. 213.22, F.S. Our response is predicated on
those facts and the specific situation summarized above. You are advised that subsequent
statutory or administrative rule changes or judicial interpretations of the statutes or rules
upon which this advice is based may subject similar future transactions to a different
treatment than expressed in this response.
You are further advised that this response, your request, and related backup documents
are public records under Chapter 119, F.S., and are subject to disclosure to the public

Technical Assistance Advisement
Page 5
under the conditions of S. 213.22, F.S. Confidential information must be deleted before
public disclosure. In an effort to protect confidentiality, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement,
the backup material, and this response, deleting names, addresses, and any other details
which might lead to identification of the taxpayer. Your response should be received by
the Department within 10 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you
may contact me directly at 850-922-4784.
Sincerely,

Leigh L. Ceci
Tax Law Specialist
Technical Assistance & Dispute Resolution
Record ID: 82786