Sales and Use Tax TAA 13A-009 - Medical Products

SUMMARY

TAX: Sales and Use Tax 
TAA NUMBER: 13A-009 
ISSUE: Medical Products 
STATUTE CITE(S): 212.05, 212.08(2), F.S 
RULE CITES(S): 12A-1.020, F.A.C.

QUESTION(S): Are Taxpayer’s list of surgical products and supplies subject to Florida sales tax?

ANSWER: Section 212.08(2)(a), F.S., provides a specific exemption for certain medical products and supplies when such medical products and supplies are dispensed according to a prescription written by a prescriber authorized by law to prescribe medicinal drugs. Items are also exempt if included on Form DR-46NT, Nontaxable Medical and General Grocery List, as approved by the Department of Health.

Rule 12A-1.020(6), F.A.C., provides that the sales of medical products, supplies, or devices to hospitals, healthcare entities, or licensed practitioners are exempt when: 1) dispensed under federal or state law only by the prescription or order of a licensed practitioner; and 2) intended for use on a single patient and not intended to be reusable.

May 3, 2013

Re: Technical Assistance Advisement – TAA 13A-009 
Sales and Use Tax - Medical Product 
Section: 212.05 and 212.08(2), Florida Statutes (F.S.) 
Rule: 12A-1.020, Florida Administrative Code (F.A.C.) 
Petitioner: XXX [hereinafter “Taxpayer”]

Dear XXX:

This letter is a response to your petition dated April 8, 2013, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced party and matter. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you under the authority of Section 213.22, F.S. 

Presented Facts

Your petition provides the following:

[Taxpayer] is a worldwide leader of specialty medical products. We carry an expensive line of products including XXX, XXX, XXX, XXX, XXX, XXX, and XXX (all products are primarily single use).

This inquiry is in regards to the taxability on the sale of medical products to hospitals for use by physicians during a surgical procedure. Please provide a binding ruling on the taxability of the product families listed on the enclosed list. 

The enclosed list of products, along with information about each one, was included with your petition. The list is as follows:

You also provided documents from your website on each of the medical products listed. After a presentation and discussion of the statutory and regulatory provisions that address sales tax on medical products, the Department will discuss each item listed above.

Requested Advisement

Are Taxpayer’s sales of the medical products listed above subject to tax in Florida?

Law & Discussion

Section 212.08(2), F.S., provides in part:

(2) EXEMPTIONS; MEDICAL.--

(a) There shall be exempt from the tax imposed by this chapter any medical products and supplies or medicine dispensed according to an individual prescription or prescriptions written by a prescriber authorized by law to prescribe medicinal drugs . . . .

Rule 12A-1.020(6), F.A.C., provides in pertinent part:

(6) MEDICAL PRODUCTS, SUPPLIES, OR DEVICES.

(a) “Medical products, supplies, or devices” are any products, supplies, or devices that are intended or designed to be used for a medical purpose to treat, prevent, or diagnose human disease, illness, or injury. The purpose is assigned to a product, supply, or device by its label or its general instructions for use.

(b) Unless specifically exempt, products, supplies, or devices sold to hospitals and healthcare entities or to licensed practitioners are subject to tax. . . .

(c)1. Medical products, supplies, or devices sold to hospitals, healthcare entities, or licensed practitioners are exempt when:

a. The medical product, supply, or device must be dispensed under federal or state law only by the prescription or order of a licensed practitioner; and

b. The medical product, supply, or device is intended for use on a single patient and is not intended to be reusable.

2. Medical trays and surgical or procedure kits containing medical products, supplies, or devices that are labeled to be dispensed only by the prescription or order of a licensed practitioner and are intended for use on a single patient are exempt, even when the medical tray or kit contains one or more items that, when sold separately, would be subject to tax. 

3. No exemption certificate or Annual Resale Certificate is required to be obtained by the selling dealer from the purchasing hospital, healthcare entity, or licensed practitioner to document exempt sales of medical products, supplies, or devices that are labeled to be dispensed only by the prescription or order of a licensed practitioner. However, selling dealers are required to maintain documents in their records evidencing that the medical product, supply, or device sold to a hospital, healthcare entity, or licensed practitioner is labeled to be dispensed only by the prescription or order of a licensed practitioner.

*** 

(d) 4. No exemption certificate or Annual Resale Certificate is required to make purchases of medical products, supplies, or devices exempt from tax when:

a. The item is listed as an item exempt from tax in Form DR-46NT, Nontaxable Medical Items and General Grocery List; or,

b. The label of the medical product, supply, or device indicates that it must be dispensed under federal or state law by the prescription or order of a licensed practitioner and that it is intended for use on a single patient.

Unless a specific exemption applies, s. 212.05, F.S., provides it is the legislative intent that every person is exercising a taxable privilege that engages in the business of selling tangible personal property at retail in this state. For exercising such a privilege, a tax is levied on each taxable transaction or incident. The tax is due and payable at the rate of 6 percent, plus any applicable discretionary sales surtaxes imposed under s. 212.055, F.S., on the total consideration received for each item or article of tangible personal property when sold at retail in this state.

Section 212.08(2)(a), F.S., provides a specific exemption for certain medical products and supplies when such medical products and supplies are dispensed according to a prescription written by a prescriber authorized by law to prescribe medicinal drugs. Items are also exempt if included on Form DR-46NT, Nontaxable Medical and General Grocery List, as approved by the Department of Health.

Rule 12A-1.020(6), F.A.C., provides that the sales of medical products, supplies, or devices to hospitals, healthcare entities, or licensed practitioners are exempt when: 1) dispensed under federal or state law only by the prescription or order of a licensed practitioner; and 2) intended for use on a single patient and not intended to be reusable.

Medical Products Discussion

1. Snares: A snare is a wire loop used for removing polyps and tumors. Taxpayer states this item is dispensed under federal law or state law only by a prescription and is intended for a single use. Sales of this item to a hospital under these conditions are not subject to tax.
2. Marking Pens: Marking pens include utility markers, surgical skin markers, preoperative marking products, utility markers, lab markers and superfrost markers. These items provide a method of identifying and marking instruments, specimens, incision sites prior to surgery, labware, and other objects. The markers are waterproof, non-smearing, and can be used on most surfaces. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
3. Light Handles (disposable): Taxpayer offers two disposable light handle systems – rigid light or flexible cover. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
4. Cautery Tip Cleaner: Cautery tip cleaners assist in the cleaning and removing of material from cautery tips during surgical procedures. A cautery instrument and the cautery tip are used to coagulate tissue and to control bleeding. Taxpayer states this item is dispensed under federal law or state law only by a prescription and is intended for a single use. Sales of this item to a hospital under these conditions are not subject to tax.
5. Transparent Dressings: Taxpayer’s documentation indicates these items are “blend tone skin closures – flexible.” These items are a less painful alternative to sutures and stapling. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
6. Wound Closures: Taxpayer’s documentation indicates these items are “filament reinforced skin closures.” These items are a less painful alternative to sutures and stapling. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
7. Pin Covers: Pin covers are used to protect patients, staff, and clothing from the sharp ends of pins and wires. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for use on a single patient and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
8. Blades and Scalpels: Blades and scalpels are thin sharp blades used in surgery. These items come in many different sizes and shapes designed for specific types of surgeries. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax. 
9. Needles: Taxpayer offers a variety of needles that come in many different sizes and shapes designed for specific types of medical procedures. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
10. Fog Solution and Sponge: Anti-fog agents and treatments are chemicals that prevent the condensation of water in the form of small droplets on the surface of items that resemble fog and have applications for use in the medical field. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
11. Kittner: Taxpayer’s information describes this item as a blunt dissecting instrument allowing for safe use during laser surgery. Taxpayer states this item is dispensed under federal law or state law only by a prescription and is intended for a single use. Sales of this item to a hospital under these conditions are not subject to tax.
12. Vessel Loops: Vessel loops are used in occluding, retracting, and identifying arteries, veins, tendons, and nerves in surgical procedures. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
13. Clamp Cover: Clamp covers assist in the atraumatic clamping of delicate vessels during surgery. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
14. Suture Boots: Taxpayer’s correspondence describes these items as suture aid booties that are used to protect, tag, and to help locate sutures. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
15. Surgidyne Wound Drainage: Taxpayer’s correspondence states these items, which include drains, collection canisters, and bulb evacuators, are designed to provide superior drainage and increased patient comfort to help facilitate early patient ambulation and improved surgical recovery time. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
16. Locking Tags: Locking tags are color-coded identification tags for use in identifying instruments, carts, trays, containers, or cabinets. These items are available pre-printed with “Repair”, “Sharpen”, or “Good” on one side and blank on the other side for writing instructions. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax. 
17. Guards: Taxpayer’s correspondence refers to these items as “DuoGuards,” endoscope guards, and instrument tip protectors. The DuoGuards ensure clamping instruments stay in the proper open position. Endoscope guards safeguard the eyepieces of delicate endoscopic equipment during storage. Instrument protectors are designed to protect the tips of various instruments such as retractors, needles, and endoscopes. These items come in a variety of sizes and shapes and colors. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
18. ID Tape and Write-On ID Labels: Taxpayer’s correspondence refers to these items as instrument identification tape and write-on ID labels. The tape is flexible and adheres securely to instruments and will not chip, flake, peel, or crack and comes in a variety of colors and widths. The write-on labels are used on trays, storage areas, cabinets, and carts and come in a variety of shapes and colors. Taxpayer describes these items as dispensed under federal law or state law only by a prescription but are not intended for a single use. Since these items can be reused, sales to a hospital are subject to tax.
19. Brushes: Taxpayer’s correspondence refers to these items as “instrument and channel cleaning brushes.” These items are designed to clean surgical/medical instruments and endoscopic devices. Taxpayer states these items are dispensed under federal law or state law only by a prescription. Taxpayer also states that some of the brushes are reusable. Sales of brushes to hospitals that are intended for a single use are not subject to tax. Sales of brushes to hospitals that are intended to be reusable are subject to tax.
20. Floor Mats: Floor mats keep floors clean, dry, and slip-free and are designed to absorbent. Taxpayer’s floor mats come in a variety of colors and sizes. Taxpayer states these items are not dispensed under federal law or state law by a prescription but are intended for a single use. Since these items are not dispensed under a prescription, the sales of these items to a hospital are subject to tax.
21. Floor Suction: Taxpayer’s correspondence refers to these items as a “WaterBug Quiet Floor Suction Device” and a “WaterBoom Quiet Floor Suction Strip.” The WaterBug is device that is easily maneuverable and removes fluids with a push of your foot. The WaterBoom creates a dam to hold back, contain, and quietly suctions fluid. Taxpayer states these items are not dispensed under federal law or state law by a prescription but are intended for a single use. Since these items are not dispensed under a prescription, the sales of these items to a hospital are subject to tax.
22. Needle Counter: Taxpayer’s correspondence did not include any information on this product. Taxpayer’s list enclosed with its TAA request shows this item as requiring a prescription and intended for one time use. Sales of this item to a healthcare provider under these conditions are not subject to tax. 
23. Needle Nest and Syringe Holder: Taxpayer’s correspondence refers to these items as a syringe and scalpel handling system. They are used to provide safe and easy handling and storage for used syringes and scalpels and come in a variety of sizes. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
24. Safety Pins: Safety pins are packaged sterile. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
25. Scalpel Holder: Scalpel holders are surgical scalpel and blade handles and come in a variety of shapes to hold different sizes of surgical scalpels and blades. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
26. Secure It: Taxpayer’s correspondence refers to these items as vascular clamps. Clamps are used in occluding vessels. These items come in a variety of sizes. Taxpayer states these items are dispensed under federal law or state law only by a prescription and are intended for a single use. Sales of these items to a hospital under these conditions are not subject to tax.
27. Solidifier: This product is used to absorb liquid spills and qualifies as a Solid Regulated Medical Waste. Taxpayer states this item is not dispensed under federal law or state law by a prescription but is intended for a single use. Since this item is not dispensed under a prescription, the sales of these items to a hospital are subject to tax.
28. Verisite/Surgiguard Labels: Taxpayer’s correspondence did not include any information on this product. Taxpayer’s list enclosed with its TAA request shows this item as requiring a prescription and intended for one time use. Sales of this item to a healthcare provider under these conditions are not subject to tax.

Closing Statement

This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice, as specified in s. 213.22, F.S. Our response is predicated upon those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this advice is based may subject similar future transactions to a different treatment from that which is expressed in this response.

You are further advised that this response, your request, and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses, and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 10 days of the date of this letter.

Sincerely, 
Michael T. Cavanaugh 
Tax Law Specialist 
Technical Assistance and Dispute Resolution 
Ctrl No: 139545