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Sales & Use Tax – TAA-15A-010 – Medical, Prosthetic & Orthopedic Appliances

QUESTION: IS THE SALE OF AN XXXXX SYSTEM WHICH IS DISPENSED ONLY BY A VALID PRESCRIPTION AND IS FOR SINGLE-USE ONLY SUBJECT TO FLORIDA’S SALES TAX?

ANSWER: THE SALE OF THE XXXXX SYSTEM IS EXEMPT FROM FLORIDA’S SALES TAX UNDER S. 212.08(2)(A), F.S., AND RULE 12A-1.020(6)(C)1., F.A.C.

September 14, 2015

Re: Technical Assistance Advisement 15A-010 Florida Sales and Use Tax

Medical – XXXXX
Sections: 212.02, 212.05, 212.08, and 212.21, Florida Statutes (F.S.) Rule: 12A-1.020, Florida Administrative Code (F.A.C.)
Petitioner: XXXXX (“Taxpayer”)
BP#: XXXXX

Dear XXXXX:

This letter is a response to your petition dated XXXXX, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced petitioner 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, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of section 213.22, F.S.

Facts

Taxpayer is a C Corporation headquartered in California. Taxpayer is registered to collect and remit Florida sales and use tax. Taxpayer is in the business of manufacturing and selling urological devices.

Taxpayer seeks advice on the taxability of sales of its XXXXX (“System”) to hospital or medical facilities. System is designed to be permanently incorporated in the male urinary tract for patients with Benign Prostatic Hyperplasia (“BPH”).1

Taxpayer’s website describes System’s function as “a minimally invasive approach to treating BPH that lifts or holds the enlarged prostate tissue out of the way so it no longer blocks the urethra.”

The XXX System is indicated for the treatment of symptoms due to urinary outflow obstruction secondary to benign prostatic hyperplasia (BPH) in men 50 years of age or older.

In your letter, you provide that System provides permanent adjustable transprostatic implants which are placed by your healthcare provider during a cystourethroscopy.2 Each permanent adjustable transprostatic implant is sold to hospital or medical facilities in its own sterile, individual housing, which is designed to couple to a urethroscope. The housing is single use; it is not reloadable or reusable.

The handling tool includes a handle for positioning the implant and coupling to the urethroscope, a retractable needle for puncturing the capsule of the prostate gland, and a tensioning spring within the handle for allowing adjustment of the implant during placement.

The transprostatic implant is a permanent implant made up of standard surgical implantable materials: a nitinol capsular tab, a stainless steel urethral tab, and polyester suture that connects the two tabs.

Together, the permanent adjustable transprostatic implant and its housing form System. The implant and its housing are sold together as an indivisible unit. The urethroscope is sold separately, and it is not included in System. Taxpayer only seeks advisement of the taxability of system, and does not seek advisement on the taxability of the urethroscope.

The following was provided under XXXXX”:

Tray Contents:

  • · 1 XXXXX
  • · 1 XXXXX

RX ONLY.

Caution: Federal Law restricts this device to sale by or on the order of a physician.

STERILE. The XXXXX System has been sterilized using gamma sterilization. For single-use only and must not be resterilized. The XXXXX System is inoperable after single use.

INDICATIONS FOR USE

The XXXXX System is indicated for the treatment of symptoms due to urinary outflow obstruction secondary to benign prostatic hyperplasia (BPH) in men 50 years or older.

Requested Advisement

Are Taxpayer’s sales of Systems to hospital and medical facilities subject to Florida sales tax?

Taxpayer’s Position

Taxpayer believes that the sale of System is exempt from Florida sales tax under the provision of s. 212.08(2)(a), F.S.

Applicable Law and Discussion

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 surtaxes imposed under Section 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 that any medical products and supplies or medicine dispensed according to an individual prescription or prescriptions written by a prescriber authorized by law to prescribe are exempt from Florida sales tax.

Rule 12A-1.020(6)(a), F.A.C., defines medical products, supplies, or devices as those intended or designed to be used for a medical purpose to treat, prevent, or diagnose human illness or injury. The purpose is assigned to a product, supply, or device by its label or its general instructions for use.

Rule 12A-1.020(6)(c)1., F.A.C., provides that medical products, supplies, or devices sold to hospitals, healthcare entities, or licensed practitioners are exempt when:

  1. 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
  2. The medical product, supply, or device is intended for use on a single patient and is not intended to be reusable.

Rule 12A-1.020(6)(c)3., F.A.C., provides that 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. Selling dealers, however, are required to maintain documents in their records reflecting that the medical product, supply, or device sold to a hospital, healthcare entity, or licensed practitioner was labeled to be dispensed only by the prescription or order of a licensed practitioner.

Response

Taxpayer’s sales of Systems to hospital and medical facilities are not subject to Florida sales tax. Systems meet the definition of medical products, supplies, or devices, as Systems are products used to treat, or diagnose, human illness (BPH). The documentation provided reflects that System must be dispensed under federal or state law only by the prescription or order of a licensed practitioner, and System is intended for use on a single patient and is not intended to be reusable. Therefore, Taxpayer’s sales of Systems are specifically exempt from Florida sales tax, and Taxpayer is not required to obtain an exemption certificate or annual resale certificate at the time of the sale to document the exempt nature of the sale. Please note, however, Taxpayer is required to maintain in its books and records evidence that System which is sold to a hospital, healthcare entity, or licensed practitioner is labeled to be dispensed only by the prescription or order of a licensed practitioner.

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 on 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 than 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.

If you have any further questions with regard to this matter and wish to discuss them, you may contact me directly at 850-717-6363.

Sincerely,

Leigh L. Ceci
Tax Law Specialist
Technical Assistance & Dispute Resolution

Record ID: 202227

End Notes:

1. According to http://www.merriam-webster.com, BPH is an enlargement of the prostate gland caused by a benign overgrowth of chiefly glandular tissue that occurs especially in some men over 50 years old and that tends to obstruct urination by constricting the urethra.

2. According to http://www.medicalhealthtests.com, a cystourethroscopy or cystoscopy is a procedure that is used to examine the insides of the urethra and bladder.

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