Are Jobst burn-treatment garments (pressure vests, gloves, garments with leg zippers, and vest-with-gloves-and-face-mask combinations) exempt from Texas sales tax as braces?

Subject

Burn Wraps And Garments (Jobst Pressure Vests/Gloves/Face Masks) Used On Burn Patients — Considered Braces

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610936L

Plain-English summary

This letter is a reconsideration of an earlier October 4, 1996 opinion (written by another Comptroller staffer) that had classified certain burn-treatment items as "therapeutic devices." The taxpayer asked the Comptroller to instead classify the items as orthopedic devices or as a brace, arguing they are compression devices, custom-made by prescription for a specific individual, designed to prevent or reduce deformity of the tissue and joints and thereby reduce the risk of joint damage.

The Comptroller's response split the difference:

• Orthopedic appliance -- no. An orthopedic appliance must be specifically designed for use in the correction or prevention of human deformities, defects, or chronic diseases of the skeleton, joints, or spine. Even though burn wraps and garments may reduce joint deformities, they are not specifically designed to correct the skeleton, joints, or spine, so they do not qualify as orthopedic devices.
• Brace -- yes, for the named Jobst items. A brace is "any device used on or attached to the human body, giving rigidity or support for the purpose of correcting a physical ailment or defect." The Comptroller had already treated cervical collars and splints this way, and after reviewing additional information and literature, agreed the burn wraps meet that definition too. Specifically named as exempt braces: the Jobst pressure gradient vest, Jobst pressure vest, Jobst pressure gradient gloves, Jobst pressure garment with full length leg zippers, and the Jobst pressure vest with gloves and face mask. These are exempt when sold to individuals or to health care providers.

The letter also restates the general framework under Texas Tax Code 151.313 (Health Care Supplies): items exempt by statute can be purchased tax free by anyone, including health care providers. But a health care provider (hospital, clinic, nursing home, home health agency, etc.) that provides nontaxable health care services still owes tax on taxable supplies, materials, and equipment used to provide that service -- only items that are exempt by statute can be bought tax free.

The Comptroller rejected the taxpayer's theory that a hospitalized patient who cannot personally go buy a prescribed device is effectively buying it from the hospital, which would make the hospital a reseller. Instead, the Comptroller reaffirmed that a provider of a nontaxable service (medical, legal, banking, etc.) is the consumer of the nonexempt tangible personal property and taxable services it buys to deliver that service -- the patient is consuming the nontaxable medical service, not buying tangible personal property from the hospital.

Two items were left unresolved: gel wraps, which the Comptroller was not familiar with and asked for descriptive information about (taxable unless they qualify as a statutory exemption), and surgery garments, on which no information had been provided, so no opinion was given.

What this means for you

Medical supply sellers and manufacturers of compression/burn-treatment garments

If you sell the specifically named Jobst items -- pressure gradient vest, pressure vest, pressure gradient gloves, pressure garment with full-length leg zippers, or the pressure vest with gloves and face mask -- this ruling treats them as exempt braces when sold to individuals or to health care providers. Other burn-treatment products (like gel wraps or plastic surgery garments) are not covered by this ruling; the Comptroller explicitly declined to rule on gel wraps without more information and made no comment at all on surgery garments.

Hospitals, clinics, and other health care providers

You can purchase the named Jobst brace items tax free, just as you would any statutorily exempt health care supply under Tax Code 151.313. But remember the general rule restated here: as a provider of a nontaxable health care service, you owe tax on taxable supplies and equipment you buy to deliver that service, unless a specific statutory exemption (like the brace exemption here) applies. You are not treated as a reseller of tangible personal property to your patients merely because a patient cannot personally shop for a prescribed device.

Accountants and tax professionals advising medical providers or suppliers

Note the classification distinction the Comptroller drew: "orthopedic appliance" requires specific design to correct the skeleton, joints, or spine, while "brace" only requires that the device give rigidity or support to correct a physical ailment or defect -- a lower bar. A product can fail the orthopedic-device test yet still qualify as an exempt brace. Also note the "provider as consumer" doctrine applied here, consistent with how Texas treats other nontaxable service providers (legal, banking, etc.).

Common questions

Q: Are the Jobst pressure vests, gloves, and face masks for burn patients taxable in Texas?
A: No. The Comptroller ruled the Jobst pressure gradient vest, Jobst pressure vest, Jobst pressure gradient gloves, Jobst pressure garment with full length leg zippers, and the Jobst pressure vest with gloves and face mask all qualify for exemption as braces, when sold to individuals or health care providers.

Q: Are these items exempt as orthopedic devices instead?
A: No. The Comptroller specifically held they do not qualify as orthopedic appliances, because they are not specifically designed to correct or prevent deformities of the skeleton, joints, or spine, even though they may reduce joint deformity as a side effect of treating burns.

Q: What about gel wraps?
A: Not resolved in this letter. The Comptroller said they were not familiar with gel wraps and asked the taxpayer to send descriptive information, noting that unless gel wraps qualify as one of the items exempt by statute, they will be taxable when sold to hospitals.

Q: What about plastic surgery garments?
A: Not addressed. The taxpayer did not provide information about the surgery garments, so the Comptroller stated it could not comment on them.

Q: Does a hospital owe tax on these braces when it buys them to give to patients?
A: No, if the item is one of the named exempt braces -- the letter states these items are exempt when sold to individuals or health care providers. More generally, though, a health care provider owes tax on taxable supplies used to provide its services unless a specific statutory exemption applies.

Q: Is the hospital treated as "selling" the device to the patient?
A: No. The Comptroller rejected that framing, explaining the hospital sells a nontaxable medical service and is the consumer of nonexempt tangible personal property it uses to provide that service; the patient is not purchasing tangible personal property from the hospital.

Citations and references

Statutes:

• Texas Tax Code 151.313, Health Care Supplies (identifies items exempt by statute that may be purchased tax free by anyone, including health care providers)

Original ruling text

October 17, 1996

Dear ***:

This is in response to your letter dated October 11,
1996, requesting a reevaluation of the opinion letter dated October 4, 1996,
written by Joan Hale of this office.

Facts: You think that our classification of burn wraps
and garments as therapeutic devices is a mis-classification. You think they
should be classified as orthopedic devices since they are designed specifically
to prevent, or reduce human deformities of the tissue and joints. By
minimizing deformity, the risk of damage to the joints is also reduced. They
are compression type devices that keep pressure on the body to minimize skin
disfigurement and also to reduce the potential of other medical problems
associated with thermal injuries. These "devices" could also properly fit
under the definition of a brace. The are "a device used on the human body
giving support for the purpose of correcting a physical ailment." the garments
are custom made, by prescription, for a particular individual and cannot be
used by anyone else.

You also think the plastic surgery items were
mis-classified as therapeutic devices. For the same reasons above, you think
these items should also be classified as prosthetic or as a brace.

The burn wraps are sold on a prescription. The items
get to the user only by prescription, and the user certainly ends up being
responsible for paying. Of course, workers compensation, private insurance,
Medicare, or Medicaid may end up paying or reimbursing the user. Therefore, it
certainly seems logical that we could safely say all items are sold to the
individual by prescription, and are not sold to the hospital. The hospital is
merely the expediter, because the individual may not be physically able to get
the prescription filled.

If our position remains unchanged, you have two more
questions. First, since the code section 3.284 is dated March 1996, would the
answer be the same for the prior two years? Second, is there any appeals
procedure for disagreement other than the Texas Legislature?

Are jel wraps taxable when sold to hospitals?

Response: Texas Tax Code 151.313, Health Care Supplies,
identifies items that are exempt by statute. These items may be purchased tax
free by anyone, including health care providers.

Hospitals, clinics, nursing homes, home health care
agencies, etc., provide nontaxable health care services. A health care
provider owes tax on all taxable supplies, materials, equipment, etc., used to
provide the service. Only items that are exempt by statute may be purchased
tax free by health care providers.

An orthopedic appliance is any appliance or device
designed specifically for use in the correction or prevention of human
deformities, defects, or chronic diseases of the skeleton, joints, or spine.
Although the burn wraps and garments may reduce deformities of the joints, they
are clearly not specifically designed for use in the correction....of the
skeleton, joints, or spine. The items do not qualify as orthopedic devices.

However, after receipt of the additional information
and literature on the burn wraps, we do agree that the burn wraps meet the
definition of a brace. A brace is any device used on or attached to the human
body, giving rigidity or support for the purpose of correcting a physical
ailment or defect. This office has for some time classified cervical collars
and all types of splints as exempt as braces. The Jobst pressure gradient
vest, Jobst pressure vest, Jobst pressure gradient gloves, Jobst pressure
garment with full length leg zippers, and the Jobst pressure vest with gloves
and face mask all qualify for exemption as braces. These items are exempt when
sold to individuals or health care providers.

Our policy has always held that a provider of
nontaxable services (e.g., medical services) is the consumer of nonexempt
tangible personal property and taxable services purchased by the service
provider in order to provide the service. The patient is consuming the
nontaxable service. This is true for medical services, legal services, banking
services, and the other nontaxable services currently offered for sale in
Texas.

You suggest that since a hospitalized person is not
able to go to a medical supply store to purchase a qualifying therapeutic
device under a written prescription of a licensed practitioner of the healing
arts, the hospital obtains and "sells" the therapeutic device to the
hospitalized patient.

A person does not seek to purchase medical services at
a medical supply store; nor do they go to the hospital to purchase tangible
personal property. The hospital is selling medical services. The transaction
between the patient and the hospital is fundamentally different from the
transaction between the customer and the supply store.

If this agency were to treat a health care service
provider as a seller of tangible personal property, then all services connected
to the sale of the tangible personal property would be required to be included
and taxed as part of the sales price of the taxable item sold. We do not
believe that the Legislature intended to impose sales and use tax on medical
services (or legal services, or banking services, etc.), and we do not
administer the tax in that way.

I am not familiar with gel wraps; however, unless they
qualify as one of the items exempt by statute, they will be taxable when sold
to hospitals. Please send me descriptive information on these items.

You did not provide any information about the surgery
garments; therefore, I cannot comment on these items.

This opinion is based on the facts presented and
current law. Different facts although similar, may result in different
answers. If you have any questions or need more information, you may call me
toll free at 1-800-531-5441, ext. 50330. The direct line is 512/475-0330. You
may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bettie Peterson
Tax Policy Division