Are implantable cardiac monitors exempt from Virginia sales tax as durable medical equipment?

Subject

Exemption for durable medical equipment and devices.

Plain-English summary

A seller asked whether a small implantable cardiac monitor was exempt from Virginia sales tax. The device continuously recorded heart rhythms, was used to investigate fainting spells, could remain implanted for up to three years, and helped doctors identify cardiac irregularities and prescribe treatment.

Virginia found that the monitor met the statutory definition of durable medical equipment. The exemption applied when a monitor was purchased by or on behalf of a specific individual for that person's use.

The sale also had to be supported by a licensed medical practitioner's prescription or work order, and the seller had to retain records identifying the patient. A medical practice's bulk purchase for later dispensing did not qualify, even if a device would later be fitted or assigned to a patient, so the seller had to continue collecting tax on bulk sales.

Citations and references

• Va. Code § 58.1-609.10.10.
• 23 VAC 10-210-940 G.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-133

Original ruling text

June 24, 2016

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This will reply to your letter in which you request a ruling on behalf of (the “Taxpayer”) regarding the application of the retail sales and use tax application to a cardiac monitor (the “Monitor”) sold by the Taxpayer.

FACTS

The Taxpayer is a seller of the Monitor. The Monitor is a small implantable device that continuously monitors heart rhythms and records them automatically or by using a hand-held patient activator. The Monitor is predominantly used by persons who suffer from fainting spells. The Monitor is planted underneath the skin and continuously monitors the heart similar to an electrocardiogram. The Monitor can also be programmed to record abnormal heart rhythms automatically. The finding from the use of the Monitor enables a doctor to determine if the patient's fainting spells are the result of a cardiac irregularity and prescribe the proper medication or treatment. The Monitor is designed for long-term use and can remain implanted in a patient for up to three years.

The Taxpayer has traditionally collected the Virginia sales tax on the sale of the Monitors. Recently, one of the Taxpayer's customers questioned the application of the sales tax to the Monitors. The Taxpayer requests a ruling on the taxability of the Monitor for sale to patients in Virginia.

RULING

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 . . . 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. Durable medical equipment is equipment that (i) can withstand repeated use, (ii) is primarily or 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. [Emphasis added.]

Based on the information provided in your letter as set forth above, and the reading of the exemption under Va. Code § 58.1-609.10.10, the Monitor meets the definition of durable medical equipment and qualifies for the retail sales and use tax exemption provided that the Monitor is purchased by or on behalf of an individual for use by such individual.

Title 23 of the Virginia Administrative Code (VAC) 10-210-940 addresses the exemption for durable medical equipment and devices, and subsection G addresses purchases on behalf of an individual and provides, in part, the following:

The exemption for . . . durable medical equipment and devices and related parts and supplies specifically designed for such equipment extends to items purchased “on behalf of” an individual for his use. In order to be deemed a purchase on behalf of an individual, the item must be specifically bought for the individual. If items are purchased in bulk and then dispensed to individual patients, no exemption is applicable even if the item is modified or fitted for a specific individual.

Based on all of the above, the Taxpayer's sale of the Monitor may be exempt if the Monitor is purchased by or on behalf of a specific individual on the prescription or work-order of a licensed medical practitioner. The Taxpayer must keep a record of such sale, including a copy of the prescription or work-order with the patient's name, in order to verify the exempt sale. Bulk sales of the Monitor to a medical practice would not qualify for the exemption, and the Taxpayer should continue collecting sales tax on all sales of this nature.

The Code of Virginia and regulation sections cited in this letter are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you should have any questions concerning this ruling you may contact * in the Office of Tax Policy, Appeals and Rulings at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6163879620.T