Was a lump-sum charge for a mobile medical laser unit, technician, setup, monitoring, and consumables taxable in Florida?

Subject

Medical Services

Plain-English summary

The provider's lump-sum charge for the mobile medical service was not taxable because it transferred no taxable tangible personal property to the customer. The provider brought a van, medical laser, technician, and necessary supplies to a physician's office. The technician created a sterile setting, tested and adjusted the laser, monitored it during the procedure, and restored the site afterward, while the physician performed the operation.

Florida treated that package as a medical service, whether the facility, physician, patient, or insurer paid the bill. The provider did not sell the laser or the consumable supplies to the customer as part of the described transaction.

The provider was instead the ultimate consumer of the supplies used in performing the service and had to pay tax on their cost. The Department warned that a transfer of property would require separate analysis and that adding charges for equipment rental or supplies could make the entire charge taxable under the cited rules.

What this means for you

Bundled medical support can be treated as a service when the provider retains its equipment and consumes its own supplies. Contracts, invoices, possession, control, and any separate property charges should match that substance; otherwise the transaction may be treated as a taxable sale or rental.

Common questions

Q: Did it matter who paid the lump-sum bill? No. The described charge could be paid by the facility, doctor, patient, or insurer without changing the service characterization.

Q: Did the provider buy its consumables tax-free for resale? No. It consumed the supplies while performing the service and owed tax on their cost.

Q: What if the provider separately charged for the laser or supplies? The ruling warned that equipment-rental or supply charges could make the full charge taxable and that transferred medical property required its own exemption analysis.

Citations and references

• Fla. Stat. §§ 212.05(1)(a)-(b), 212.06(1)(a) — sales of property and provider use of consumables
• Fla. Stat. §§ 212.08(2), 212.21(2) — medical exemptions and strict exemption treatment
• Fla. Admin. Code rr. 12A-1.020, 12A-1.021 — medical products that may be transferred
• Fla. Admin. Code r. 12A-1.038 — proof of exemption or resale
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-060

Original ruling text

SUMMARY

The Taxpayer provided mobile medical surgical units which allowed certain non-invasive operative procedures to be performed in the physician's office on an outpatient-type basis. The mobile medical surgical unit consisted of a van, a medical laser, a technician, and all consumable supplies necessary for the operation. Operations performed range from simple hair removal to laser surgery. This TAA determined that the Taxpayer was strictly providing a medical service, with no transfer of taxable tangible personal property for a lump sum charge. Therefore, the lump sum amount charged by the Taxpayer for its service would not be subject to tax. However, since the Taxpayer is the ultimate consumer of all consumable supplies used in the performance of its services, this TAA provided that the Taxpayer would therefore be required to pay tax on the cost price of such consumables.

Aug 03, 1998

Re: Technical Assistance Advisement 98A-060 Sales and Use Tax - Medical Services Petitioner: XXX ("Taxpayer") FEI: XX Sections: 212.05, 212.08, 212.21, F.S. Rules: 12A-1.020, 12A-1.021, 12A-1.038, F.A.C.

Dear :

This letter is a response to your petition dated May 8, 1998, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced party 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 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.

Discussion of Facts

In your letter and in the attachments to your letter, you presented the following for review and advisement thereon:

[Taxpayer] provides mobile medical surgical units which allow certain non-invasive operative procedures to be performed in the physician's office on an "outpatient-type" basis. The mobile medical surgical unit consists of a van, a medical laser, a technician, and all consumable supplies necessary for the operation. Operations performed under this scenario range from simple hair removal to laser surgery. In all cases, the technician takes the equipment and supplies to the designated surgery site, sets up a sterile environment, tests the laser, monitors and adjusts (if necessary) the laser during the operation, and handles postoperative procedures necessary to return the surgical site to the state it was in prior to the operation. The physician performs the actual operation. Billings for these services are lump sum and can be paid by the facility, the doctor, the patient, or the patient's insurance company.

Requested Advisement

The Taxpayer seeks advisement on whether its lump sum charges for providing the above described services in Florida are taxable.

Department's Determination

Section 212.05, F.S., provides in part:

It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state.... or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and

who leases or rents such property within the state. (1) For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows: (a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible personal property when sold at retail in this state, computed on each taxable sale for the purpose of remitting the amount of tax due the state, and including each and every retail sale.... (b) At the rate of 6 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed, or stored for use or consumption in this state.

Section 212.08(2), F.S. (1997), as amended, effective July 1, 1998, by Chapter 98-143, Laws of Florida, 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; hypodermic needles; hypodermic syringes; chemical compounds and test kits used for the diagnosis or treatment of human disease, illness, or injury; and common household remedies recommended and generally sold for internal or external use in the cure, mitigation, treatment, or prevention of illness or disease in human beings, but not including cosmetics or toilet articles, notwithstanding the presence of medicinal ingredients therein, according to a list prescribed and approved by the Department of Health, which list shall be certified to the Department of Revenue from time to time and included in the rules promulgated by the Department of Revenue. There shall also be exempt from the tax imposed by this chapter artificial eyes and limbs; orthopedic shoes; prescription eyeglasses and items incidental thereto or which become a part thereof; dentures; hearing aids; crutches; prosthetic and orthopedic appliances; and funerals....

(d) This subsection shall be strictly construed and enforced.

Section 212.21(2), F.S., provides in part:

(2) It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage, consumption, or rental levied and set forth in this chapter, except as to such sale, admission, use, storage, consumption, or rental as shall be specifically exempted therefrom by this chapter subject to the conditions appertaining to such exemption....

Rule 12A-1.038, F.A.C., provides in part:

(1) It is the specific legislative intent that each and every sale, admission, use, storage, consumption, or rental is taxable under Chapter 212, F.S., unless such sale, admission, use, storage, consumption, or rental is specifically exempt. The exempt status of the transaction must be established by the dealer. Unless the dealer shall have taken from the purchaser a certificate signed by the dealer or the dealer's authorized representative to the effect that the property or service was purchased for resale and bearing 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, or a certificate signed by an authorized representative of the organization bearing the number of the organization's consumer's exemption certificate, the effective date of the certificate, and the expiration date of the certificate, the sale shall be deemed to be a taxable sale at retail....

From the facts presented, it appears that the Taxpayer is strictly providing a medical service, with no transfer of taxable tangible personal property, for a lump sum charge. Therefore, the lump sum amount charged by the Taxpayer for its service would not be subject to tax.

However, sections 212.05(1)(b) and 212.06(1)(a), F.S., provide that tax is due on the cost price, as of the moment of

purchase, on the use of tangible personal property in Florida. Since the Taxpayer is the ultimate consumer of all consumable supplies used in the performance of its services, the Taxpayer would therefore be required to pay tax on the cost price of such consumables.

If there is a transfer of tangible personal property, a determination would have to be made on the taxability of the tangible personal property. Rules 12A-1.020 and 12A-1.021, F.A.C., outline the taxability of tangible personal property (related to medical services) which may be transferred. I have enclosed these rules for the Taxpayer's review and guidance. Also note that if, in addition to the services provided, the Taxpayer was making charges for items such as equipment rental and/or supplies, the entire charge would be subject to tax as provided in s. 212.05, F.S. or, if the Taxpayer is making a taxable sale for resale (a sale to any person other than the end consumer), the Taxpayer is required to charge tax, unless the Taxpayer accepts a valid resale certificate or consumer's certificate of exemption at the time of sale.

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 upon 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 from that which is 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 that 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 this response.

Sincerely,

Leigh L. Ceci
Tax Law Specialist

Enclosures
Control #34145