When could a manufacturer sell prescription medical trays to Florida hospitals and physicians without collecting sales tax?

Plain-English summary

The Florida Department of Revenue concluded that a manufacturer could sell prescription medical trays to hospitals and physicians without sales tax only if three documentation and use conditions were met.

First, the trays had to be dispensed only pursuant to a prescription. Second, when the buyer was a hospital holding a consumer's certificate of exemption, the seller had to obtain that certificate number. Third, for a hospital without such a certificate or for a physician, the seller needed either a resale certificate or a certificate stating that the trays would be used under a physician's order.

The trays were FDA-listed medical devices carrying the label that federal law restricted them to sale by or on a physician's order. Even so, the Department required the seller to maintain the specified purchaser documentation rather than rely on the product label alone.

For tax previously collected on qualifying exempt sales, the manufacturer first had to refund its customers and then apply to the Department on Form DR-26 with proof of the exemption and customer repayments. The limitation periods quoted in this 1997 ruling should be checked against current law.

What this means for you

Medical-device manufacturers

Prescription status was necessary but not sufficient. The seller also needed the correct exemption, resale, or physician-order-use documentation for the buyer.

Hospitals and physicians

An exempt hospital supplied its consumer's certificate number. Other hospitals and physicians had to document resale or that the trays would be used by a physician's order.

Accountants and tax professionals

Match the certificate to the purchaser's status and preserve it. A sale was treated as taxable unless the dealer obtained the required documentation.

Common questions

Q: Did an FDA prescription label automatically make the sale exempt? A: No. The ruling also required purchaser documentation and prescription-only dispensing.

Q: What did an exempt hospital provide? A: Its consumer's certificate of exemption number.

Q: What documentation was required from a physician or nonexempt hospital? A: A resale certificate or a certificate stating that the trays would be used under a physician's order.

Q: Could the manufacturer recover tax previously remitted? A: Only after refunding the tax to customers and filing Form DR-26 with documentation of the exemption and refunds.

Citations and references

• Fla. Stat. §§ 212.07(1)(b), 212.08(2)(a), 212.21(2), 213.22, and 215.26(2)
• Fla. Admin. Code r. 12A-1.038(1)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-004

Original ruling text

SUMMARY

Prescription medical trays sold by the manufacturer of the trays to hospitals and physicians are not subject to tax only when all of the following conditions are satisfied: (a) the medical trays must be dispensed only pursuant to a prescription; (b) if the prescription medical trays are sold to a hospital which holds a consumer's certificate of exemption, taxpayer must obtain the number of the consumer's certificate of exemption from such hospital; and (c) if the prescription medical trays are sold to a hospital not holding a consumer's certificate of exemption, or to a physician, then the taxpayer must obtain a resale certificate or a certificate from such hospital or physician indicating that the medical trays will be used via a physician's order.

Jan 17, 1997

Re: TAA 97A-004
Sales of Medical Trays
Sections 212.08(2)(a), 212.21(2), F.S.
Rule 12A-1.038(1), F.A.C.

Dear :

This is in response to your letter of August 14, 1996, in which you requested the issuance of a technical assistance advisement on behalf of your client, XXX (hereinafter "Taxpayer"), regarding the taxability of your client's sales of prescription medical trays to hospitals or physicians in Florida. Also, you requested a ruling regarding whether your client may refund tax previously collected and remitted to the Department on its sales of prescription medical trays to its customers and obtain a refund from the Department.

In your request you explained that all the medical trays your client sells to hospitals and physicians in Florida are

listed with the FDA as medical devices, and each bears the prescription label, "Caution: Federal law restricts this device to sale by or on the order of a physician."

APPLICABLE AUTHORITY

Section 212.21(2), F.S., provides that it is the specific legislative intent to tax each and every sale, use, storage, consumption or rental levied and set forth in Part I, Chapter 212, F.S., except those that are specifically exempted therefrom by Part I, Chapter 212, F.S. Section 212.07(1)(b), F.S., provides that a resale must be in strict compliance with the rules and regulations of the Department. Rule 12A-1.038, F.A.C., states that a sale is taxable unless the dealer obtains from the purchaser either a resale certificate or a certificate evidencing that the purchaser holds a consumer's certificate of exemption. The resale certificate must be signed by the dealer, or the dealer's authorized representative; must state that the property was purchased for resale; and must bear the date, the name and address of the purchaser, the effective date of the certificate, and the number of the dealer's certificate of registration. The certificate evidencing that the purchaser is an exempt organization must be signed by an authorized representative of the organization; and must bear the number of the organization's consumer's exemption certificate, the effective date of the certificate, and the expiration date of the certificate.

Section 212.08(2)(a), F.S., provides that there shall be exempt from the tax imposed by Part I, Chapter 212, F.S., any product, supply, or medicine dispensed in a retail establishment by a pharmacist licensed by the state, according to an individual prescription or prescriptions written by a prescriber authorized by law to prescribe medicinal drugs.

Concerning applications for refunds of sales tax, section 215.26(2), F.S., provides that they must be filed with the Comptroller within 3 years after the right to the refund shall have accrued, except applications for refunds of sales tax which was paid after September 30, 1994, must be filed with the Comptroller within 5 years after the date the tax is paid.

DEPARTMENT RESPONSE

Prescription medical trays sold by Taxpayer to hospitals and physicians are not subject to tax only when all of the following conditions are satisfied: (1) the medical trays must be dispensed only pursuant to a prescription; (b) if the prescription medical trays are sold to a hospital which holds a consumer's certificate of exemption, taxpayer must obtain the number of the consumer's certificate of exemption from such hospital; and (c) if the prescription medical trays are sold to a hospital not holding a consumer's certificate of exemption, or to a physician, then the taxpayer must obtain a resale certificate or a certificate from such hospital or physician indicating that the medical trays will be used via a physician's order.

As to your inquiry regarding a claim for refund; if your client has sold prescription medical trays determined to be exempt from tax, and collected tax thereon, it must first refund the tax to its customers before filing an application for refund with the Department on form DR-26. Your client must provide documentation with its refund application to show that the items are exempt from tax and that the tax was refunded to its customers.

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 and your request are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S. Your name, address, and any other details which might lead to

identification of the taxpayer must be deleted by the Department before disclosure. In an effort to protect the confidentiality of such information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or the response.

Sincerely,

Richard S. Harrod
Senior Tax Specialist
Tax Policy and Dispute Resolution

RSH/h
Control No. 26308