Could single-use sinus catheter systems be sold tax-free to licensed physicians in Virginia?

Subject

Catheter systems may be sold exempt of the tax to licensed physicians

Plain-English summary

The sinus catheter systems could be sold tax-free to licensed physicians when purchased for specific patients. The systems included guide and balloon catheters, guidewires, an inflation device, and sometimes a rinsing catheter. They were used in physician-performed sinus procedures and discarded afterward; one version left a saline-filled balloon in place for 14 to 28 days.

Virginia law expressly included catheters in the medical-device exemption, but a physician's practice purchase counted as made on behalf of an individual only when it was for a specific patient.

The seller therefore needed a signed statement from each physician customer certifying that the catheter system was purchased on behalf of a particular patient.

What this means for you

• A physician's general inventory purchase was not automatically exempt under the ruling.
• The exemption depended on purchase for a specific individual patient.
• The medical-device seller had to retain appropriate signed physician documentation.
• The result applied to the described catheter systems and stated purchasing facts.

Common questions

Did the catheters have to be reusable?

No. The ruling described single-use systems and still allowed the exemption when the patient-specific condition was met.

What documentation did the seller need?

A signed statement from the physician certifying that the system was purchased on behalf of a specific patient.

Citations and references

• Va. Code § 58.1-609.10(10).
• 23 VAC 10-210-940(E).
• P.D. 01-148, P.D. 95-266, P.D. 00-138, and P.D. 00-215, cited in the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-226

Original ruling text

September 22, 2010

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This reply is in response to your letter submitted on behalf of * (the "Taxpayer"), in which you request a ruling regarding the application of the retail sales and use tax to single use medical devices. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer sells balloon catheter systems that are used by physicians to alleviate sinus conditions. The catheter system, which can only be used by and upon the order of a physician, consists of a guide catheter, guidewire, balloon catheter and a balloon inflation device. The system may also include a lavage (rinsing) catheter.

The guide catheter and guidewire are inserted into the sinus cavity. The balloon catheter is then inserted over the guidewire and positioned in the sinus cavity. The balloon is inflated to expand the size of the sinus cavity. The entire system is then removed and discarded. Where the physician chooses to rinse the sinus, a lavage catheter is inserted and a liquid spray is applied. In both cases, the entire system is discarded upon completion of the procedure.

The Taxpayer also sells an additional product that follows the same insertion procedure; however, the balloon is first filled with a saline solution and inserted into the sinus cavity where it remains for 14 to 28 days. The delivery catheter is removed and discarded. At the end of the treatment period, the (balloon is removed and discarded.

Although currently taxing the catheter system in question, the Taxpayer requests this ruling in response to its customer's assertion that the devices are exempt prosthetic or orthopedic equipment.

RULING

Virginia Code § 58.1-609.10 10 exempts "[w]heelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters , urinary accessories, other durable medical equipment and devices, and related parts and 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." Emphasis added.

Title 23 of the Virginia Administrative Code 10-210-940 E explains the application of the exemption and states the items purchased by a licensed physician for use in his professional practice are deemed to be purchases on behalf of an individual only if purchased for a specific individual.

Therefore in this instance, the catheter systems may be sold exempt of the tax to licensed physicians when the physician provides the proper documentation indicating that the purchase of the catheter system is for an individual. Pursuant to Public Document (P.D.) 01-148 (10/3/01), the Taxpayer should obtain a signed statement from each customer (physician) certifying that the catheter system is purchased on behalf of a specific patient. Also see P.D. 95-266 (10/17/95), P.D. 00-138 (7/31/00) and P.D. 00­215 (12/7/00).

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

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 response, you may contact * in the Office of Tax Policy, Appeals and Rulings at ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-4130278258.M