Did 100% natural latex mattresses qualify for Virginia's durable-medical-equipment sales-tax exemption?

Plain-English summary

Virginia held that 100% natural latex mattresses were taxable retail products, not exempt durable medical equipment.

The exemption covered qualifying equipment bought by or for an individual for that individual's exclusive use. But the ruling followed an earlier determination involving another location of the same retailer: these mattresses were useful even when illness or injury was absent, so they failed the exemption's criteria.

The retailer's cited federal flammability regulation did not determine Virginia sales-tax treatment. The Department also noted that a medical-supplier purchase or physician's prescription alone was not dispositive of exempt status.

Common questions

Does a natural or health-oriented mattress automatically qualify as medical equipment? No.

Would a prescription alone settle the exemption? No, under the cited regulation.

Did the federal mattress rule create a Virginia exemption? No. It concerned federal flammability enforcement, not Virginia tax.

Citations and references

• Va. Code § 58.1-609.10 10
• 23 VAC 10-210-940 F
• P.D. 16-81 (May 16, 2016)

Subject

Items listed in the appeal did not meet criteria of the exemption statute

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-55

Original ruling text

April 19, 2017

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

Dear

This is in response to your letter in which you seek correction of retail sales and use tax assessments issued to * (the “Taxpayer”) for the period March 2013 through December 2015. I apologize for the delay in responding to your correspondence.

FACTS

The Taxpayer is a retailer of furniture and 100% natural latex mattresses. As a result of the Department's audit, sales tax was assessed on untaxed sales of 100% natural latex mattresses. The Department previously audited another location of the Taxpayer and assessed the sales tax on untaxed sales of the 100% natural latex mattresses as well. The Taxpayer filed an appeal regarding that location, and a determination letter was issued by the Tax Commissioner as Public Document 16-81 (5/16/16), which upheld the assessment. In regard to the location and the audit at issue in this appeal, the Taxpayer claims that the 100% natural latex mattresses qualify for the durable medical exemption and cites Code of Federal Regulations (CFR) § 1632.31 (f) (1) in support of its claim.

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.”

Title 23 of the Virginia Administrative Code 10-210-940 F states that “[t]he tax does not apply to . . . . durable medical equipment . . . when these items are purchased by or on behalf of an individual for the individual's exclusive use. The fact that an item is purchased from a medical equipment supplier or on a physician's prescription is not dispositive of its exempt status .” [Emphasis added.]

In my prior determination involving an appeal of an assessment issued to the Taxpayer's other retail location, I ruled that the administration and enforcement of flammable fabrics under CFR § 1632.31 (f) (1) is a federal regulation and has no bearing on the application of the Virginia retail sales and use tax. In addition, I determined that the 100% latex mattress did not meet criteria (iii) of the exemption statute because it is useful in instances when illness or injury is not present. The issues in the current audit are the same issues raised and addressed in the prior audit of the Taxpayer's other retail location. For the reasons stated in the prior determination, the 100% natural latex mattresses are subject to the retail sales and use tax.

CONCLUSION

The assessment is correct as issued. An updated bill with interest accrued to date will be mailed to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. The Taxpayer should submit payment to: Virginia Department of Taxation, Main Street Centre, 600 East Main Street, 15 th Floor, Richmond, Virginia 23219, Attention: *. If the Taxpayer has questions concerning payment of the assessment or needs to set up a payment plan, please contact at **.

The Code of Virginia section, regulation and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions about this determination, please contact * in Office of Tax Policy, Appeal and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/705.T