Were injectable dermal fillers used for HIV-treatment-related facial lipoatrophy exempt from Virginia sales and use tax as prosthetic devices?

Subject

Aesthetic injectable implant does not qualify for exemption from the tax.

Plain-English summary

The injectable implant did not qualify for Virginia's prosthetic-device exemption. The taxpayer argued that the product was prescribed to treat facial lipoatrophy caused by HIV drug therapy and was medically necessary rather than merely cosmetic.

The Department focused on what the product did. Virginia's regulation defined a prosthetic device as one that replaces a missing body part or function. This temporary dermal filler restored skin volume and improved the patient's appearance, but the Department found that it did not replace a body part or bodily function.

The Department therefore kept the implant taxable and denied any audit adjustment or refund, even though the treatment could improve appearance and alleviate related psychological effects.

What this means for you

• A prescribed or medically helpful product is not automatically an exempt prosthetic device in Virginia.
• The exemption turned on whether the item replaced a missing body part or bodily function.
• A product characterized as cosmetic can remain taxable even when used to address a condition resulting from medical treatment.
• The ruling concerned this specific temporary dermal filler and the facts presented.

Common questions

Did the HIV-related medical context make the implant exempt?

No. The Department accepted the described treatment context but still classified the filler as cosmetic because it restored appearance rather than replacing a missing part or function.

Did the taxpayer receive a refund?

No. The Department found no basis to adjust the paid audit assessment.

Citations and references

• Va. Code § 58.1-609.10(10).
• 23 VAC 10-210-940.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-243

Original ruling text

October 21, 2010

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

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer"), in which you request a reconsideration of the prior determination issued to the Taxpayer on April 27, 2009. The determination was issued to the Taxpayer in regard to sales and use tax assessed for the period June 2005 through March 2008. I apologize for the delay in responding to your letter.

FACTS

In the Department's prior letter, it was determined that the Taxpayer's purchase of aesthetic injectable implants used in the treatment of facial wrinkles did not meet the requirements set out in Va. Code § 58.1-609.10 10, and therefore did not qualify for exemption from the tax.

In its request for reconsideration, the Taxpayer contends that the aesthetic injectable implants are prescribed and used to treat lipoatrophy resulting from drug therapy used in the treatment in human immunodeficiency virus (HIV) patients. As such, the Taxpayer contends the implants are used for medically necessary treatments and not only for cosmetic purposes. The Taxpayer has paid the assessment and seeks a refund of the tax assessed on the contested aesthetic injectable implants.

DETERMINATION

Virginia Code § 58.1-609.10 10 provides an exemption for "prosthetic devices and . . . 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." Prosthetic devices are defined in Title 23 of the Virginia Administrative Code 10-210-940 to mean "devices which replace a missing part or function of the body and shall include any supplies physically connected to such devices."

Thus, implants that are used to replace a missing body part, as in reconstructive surgery or implants designed to perform a function of the body such as a cardiac pacemaker, may be purchased exempt from the tax when such purchases are made by or on behalf of specific individuals. However, implants used for cosmetic purposes are not replacing a missing body part or function and thus do not qualify for exemption from the tax, regardless of whether they are purchased by or on behalf of an individual.

Facial lipoatrophy associated with HI/ infection is the loss of fat in the face resulting from an adverse side effect associated with certain HIV drug treatments. The chief characteristics of facial lipoatrophy are sinking of the cheeks, eyes, and temples, due to the loss of subcutaneous fat. Facial lipoatrophy in HIV patients may contribute to depression and related adverse psychological issues such as social stigmatization and low self esteem.

The aesthetic injectable implant at issue is a temporary dermal filler that contains nonanimal hyaluronic acid, a substance closely resembling the hyaluronic acid that occurs naturally in the body. The aesthetic injectable implant is injected into the skin to enhance a patient's looks by restoring the skin's volume. While the use of the aesthetic injectable implant improves the HIV patient's appearance and may alleviate depression, the aesthetic injectable implant is a cosmetic treatment rather than the replacement of missing body part or function of the body for medical purposes. Accordingly, I am not persuaded by the Taxpayer's argument. The aesthetic injectable implant used to enhance a patient's facial appearance by restoring the skin's volume does not qualify for exemption from the tax in Va. Code § 58.1-609.10 10.

CONCLUSION

Based on this 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 and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy library of the Department's web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Acting Tax Commissioner

AR/1-3551334469.T