Was a permanently implanted birth-control device exempt from Virginia sales and use tax as durable medical equipment?

Subject

Birth control implant device does not meet requirements for exemption

Plain-English summary

A manufacturer sold a birth-control device consisting of micro-inserts, a disposable delivery system, and a disposable introducer. A gynecologist placed a micro-insert in each fallopian tube, where it expanded and remained anchored to provide permanent contraception. The device had federal approval for commercial distribution.

Virginia denied the sales-and-use-tax exemption for durable medical equipment. Va. Code § 58.1-609.10(10) required qualifying equipment to withstand repeated use, serve a medical purpose, generally lack usefulness without illness or injury, and be appropriate for home use. It also had to be purchased by or for an individual for that person's use.

The implant failed at least two mandatory criteria: it could not withstand repeated use and was not appropriate for home use because a trained medical practitioner had to implant it. The Commissioner said neither purchase from a medical supplier nor a physician's prescription was by itself decisive, and he lacked authority to create an exemption the statute did not provide.

What this means for you

• Medical purpose and regulatory approval did not automatically make the device tax-exempt.
• Virginia required every statutory durable-medical-equipment criterion to be satisfied.
• A single-use product requiring professional implantation failed the repeated-use and home-use requirements applied in this ruling.

Citations and references

• Va. Code § 58.1-609.10(10), durable medical equipment, devices, and related parts and supplies.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-45

Original ruling text

April 26, 2007

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This will reply to your letter in which you request a ruling on the application of the retail sales and use tax to the sale of a birth control device by your client, (the "Taxpayer").

FACTS

The Taxpayer manufacturers and sells a medical birth control device. The device is designed to provide an alternative to incisional methods of tubal ligation for women seeking permanent contraception.

The birth control device consists of a micro-insert, a disposable delivery system and a disposable split introducer. A gynecologist places one micro-insert in the proximal section of each fallopian tube lumen. When the micro-insert expands upon release, it remains anchored in the fallopian tube and results in permanent birth control. The birth control device has received Federal Food and Drug Administration approval for commercial distribution.

RULING

Virginia Code § 58.1-609.10 10 provides an exemption from the retail sales and use tax for durable medical equipment and devices, and related parts and supplies specifically designed for those products when such items are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment that (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home.

In order to qualify as exempt durable medical equipment, the product must meet the four criteria provided above and the products must be purchased by or on behalf of an individual for use by such individual. The fact that an item is purchased from a medical equipment supply store or is purchased on a physician's prescription is not dispositive of its exempt status.

Based on the information provided, the permanent birth control device does not meet criteria (i) and (iv) because the device cannot withstand repeated use and is not appropriate for use in the home, as the device must be implanted by a trained medical practitioner. While I recognize that the birth control device represents new technology and is used to provide a permanent contraception option for women, the device does not meet all of the mandatory requirements set out in the exemption statute. Absent the statutory authority, I am unable to grant an exemption from the retail sales and use tax in this instance.

This ruling is based on the facts presented as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.

The Code of Virginia section cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library of the Department's

website. If you have any questions about this ruling, you may contact * in the Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1048631835.i