Were mastectomy bras sold for use with prosthetic breasts exempt from Virginia sales tax as durable medical equipment or related supplies?

Subject

Mastectomy bra does not qualify as an exempt supply for use with a prosthetic breast.

Plain-English summary

Virginia treated the mastectomy bras at issue as taxable retail products, not exempt durable medical equipment or essential supplies for breast prostheses. A nonprofit medical-equipment retailer had paid an audit assessment on the bras and sought a refund.

Virginia's durable-medical-equipment exemption required an item to withstand repeated use, be primarily and customarily used for a medical purpose, generally be useless without illness or injury, and be appropriate for home use. The Department concluded that the bras did not satisfy the medical-purpose requirement. It contrasted them with compression bras used after surgery to assist healing.

The bras also did not qualify as supplies physically connected to an exempt prosthetic device. Earlier rulings had exempted items without which medical equipment could not function, such as patient kits essential to passive-motion devices and liquid nutrients essential to feeding equipment. Here, the Department said a breast prosthesis could be worn with a regular supportive bra or held in a pocket sewn into a regular bra. The mastectomy bra was therefore not essential to the prosthesis's function.

The Department upheld the audit and denied a refund of the tax and interest already paid.

What this means for you

• Sale by a medical supplier, a physician's prescription, or insurance reimbursement does not by itself create a Virginia sales-tax exemption.
• A product associated with a prosthetic device must satisfy the statute on its own or be essential to the device's function.
• Specialized clothing may remain taxable when its role is support, fit, comfort, or appearance rather than a qualifying medical function.

Common questions

Why was the mastectomy bra not durable medical equipment?

The Department found that it did not serve the medical purpose required by the statutory definition.

Would every bra used after mastectomy be taxable under this reasoning?

The ruling distinguished a compression bra used after surgery to assist healing as an item that could serve a medical purpose. It decided only the bras described in this audit.

Why was the bra not an exempt supply for the prosthesis?

A breast prosthesis could function with a regular supportive bra or a pocket added to one, so the special bra was not essential.

Citations and references

• Va. Code § 58.1-609.10(10).
• 23 VAC 10-210-940.
• Virginia Public Documents 89-56, 91-24, and 92-118.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-216

Original ruling text

September 16, 2010

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your, letter in which you seek correction of a retail sales and use tax audit assessment issued to * (the "Taxpayer") for the period September 2005 through September 2008. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is a nonprofit corporation engaged in the retail sale of medical equipment and supplies. The Taxpayer was assessed the sales tax on the sale of mastectomy bras to patients for use with prosthetic breasts. Relying on Title 23 of the Virginia Administrative Code (VAC) 10-210-940, the Taxpayer contends that sales of mastectomy bras are statutorily exempt sales that were incorrectly assessed tax in the audit. The Taxpayer has paid the assessment and requests a refund of the tax and interest paid on the contested mastectomy bras.

DETERMINATION

Virginia Code § 58.1-609.10 10 provides, in pertinent part, that the retail sales and use tax does not apply to:

Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, other durable medical equipment and devices, and related parts anti supplies specifically designed for those products... when such items or parts 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 supplier or is purchased on a physician's prescription is not dispositive of its exempt status. The same holds true for items purchased on a physician's prescription or those items for which a patient receives reimbursement through Medicare or private insurance.

Public Document (P.D.) 92-118 (6/29/92) addresses bathing suits for mastectomy patients. In that case, the Tax Commissioner ruled that a bathing suit designed for mastectomy patients did not qualify as exempt durable medical equipment because a bathing suit is not equipment, does not serve a medical purpose and is designed for use outside the home. Instead, a bathing suit designed for mastectomy patients is to make the individual feel more comfortable about her physical appearance in a pool or beach setting.

Similar to the bathing suit, the bra at issue, while designed for mastectomy patients, does not serve a medical purpose as contemplated in criteria (ii) of the statute. To better illustrate this point, a comparative item that would serve a medical purpose sufficient to meet criteria (ii) would be a compression bra that is used by mastectomy patients after surgery to help in the actual healing process. Based on the statute and consistent with the public document, the mastectomy bra at issue does not qualify for the cited exemption.

Additionally, Title 23 VAC 10-210-940 defines "prosthetic devices" to mean "devices which replace a missing part or function of the body and shall include any supplies physically connected to such devices ." Emphasis added.

In P.D. 89-56 (1/4/89), the Tax Commissioner ruled that patient kits were related parts and supplies specifically designed for use with the passive motion devices and exempt from the tax when purchased by or on behalf of a specific individual or nonprofit hospital. The patient kits were considered an intrinsic part of the rehabilitative process in that the passive motion devices could not be used without the kits. P.D. 91-24 (3/11/91) addresses liquid nutrients for use with enteral and parenteral feeding equipment. The Tax Commissioner ruled that nutritional products that were specifically sold for use with enteral or parenteral feeding equipment qualify for exemption. The nutritional products are an essential supply for use with the enteral or parenteral feeding equipment ( i.e. , the enteral or parenteral feeding equipment is of no use without the liquid nutrients.) According to the public documents, the associated items sold with the exempt device or equipment qualified for exemption because they were essential to the functioning of the device or equipment.

In this instance, based on information from the * and related websites, breast prosthesis either be worn with a regular well-fitting bra that provides support to ensure that the prosthesis fits well or a pocket may be sewn into a regular bra to hold the breast prosthesis in place. As such, while a mastectomy bra may be designed to support a prosthetic breast, it is not an essential supply necessary for the function of breast prostheses. Therefore, the Taxpayer's mastectomy bra does not qualify as an exempt supply for use with a prosthetic breast.

CONCLUSION

Based on the determination, there is no basis to allow for any adjustment to the Department's audit assessment and accordingly, no basis for a refund of the tax that has been properly assessed and paid.

The Code of Virginia section, regulation and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Acting Tax Commissioner

AR/1-3551334357.T