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Sales and Use Tax TAA 14A-013 Medical Product


QUESTION: ARE THE SALES OF PRESCRIBED MEDICAL DEVICES USED IN THE TREATMENT OF CANCER TUMORS EXEMPT FROM FLORIDA SALES TAX?

ANSWER: THE SALES OF PRESCRIBED MEDICAL DEVICES USED IN THE TREATMENT OF CANCER TUMORS ARE EXEMPT FROM FLORIDA SALES TAX. THE DEVICE IS INTENDED TO BE USED FOR MEDICAL PURPOSES TO TREAT HUMAN ILLNESS. ADDITIONALLY, THE DEVICE IS DISPENSED TO PATIENTS PURSUANT TO PRESCRIPTIONS WRITTEN BY LICENSED PRACTITIONERS. THEREFORE, THE DEVICE IS EXEMPT FROM FLORIDA SALES TAX AS PROVIDED IN S. 212.08(2)(a), F.S., AND RULE 12A-1.020(6)(e), F.A.C.

June 2, 2014

Re: Technical Assistance Advisement – TAA 14A-013
Florida Sales and Use Tax
Medical Product
Section: 212.08, Florida Statute (F.S.)
Rule: 12A-1.020, Florida Administrative Code (F.A.C.)
Petitioner: XXXX(“Taxpayer”)
FEI#: XXXX
Business Partner Number: XXXX

Dear XXXX:

This letter is a response to your petition dated XXXX, 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 (s.) 213.22, F.S.

FACTS

Taxpayer is a XXXX company dedicated to the development and commercialization of XXXX treating field’s therapy. XXXX treating field’s therapy is for the treatment of cancer patients with solid XXXX. XXXX treating field’s therapy is a low-toxicity treatment that uses low-intensity alternating electric fields to exert physical forces on the electrically charged components of dividing cancer cells, which is intended to disrupt cell division and cause cancer cell death.

XXXX treating field’s therapy is delivered via a treatment which allows patients to maintain their normal daily activities while receiving continuous anti-cancer treatment. Taxpayer developed the XXXX (“Device”), which is used to treat solid cancerous XXXX of the head. The Device works by producing alternating electrical fields within the human body that are believed to disrupt the rapid cell division exhibited by cancer cells. The alternating electrical fields are applied to the brain through electrodes placed on the scalp. Device is used as a stand-alone treatment for adults with confirmed gliobastoma or GBM that recurs (referred to as recurrent GBM). The treatment is designed for continuous use throughout the day.

There are 3 primary components to the Device:

• An electric field generator, connection cables, a portable battery, power supply, rack and a power cord
• INE transducer arrays
• Ancillary items and accessories consisting of boxes, XXXX treating fields bags, operations manuals and self-exchange kits

Patients pay a monthly fee for the Device and therapy, which is broken down into a charge for the durable components and a monthly fee to purchase transducer arrays. To obtain Device, certified physicians write a prescription for the patient and submit the prescription to Taxpayer’s shipping facility located in New Hampshire. The prescription is filled, and the components of Device are shipped to the closest local technical support staff specialist or to the certified physician’s office. The patient will receive an agreement to review and sign once the patient is trained how to apply the therapy himself or herself. The technical staff and the certified physician are trained on how to administer the XXXX treating field’s therapy to the patient in advance.

The day the patient starts treatment, the local technical support staff deliver the components of Device to the patient, and they train and educate the patient on the proper way to administer the treatment and the technical aspects of the XXXX treating field’s therapy. The patient is provided with a user manual and technical support phone number. The patient then receives additional training, guidance and treatment initiation from his or her physician. The on-going care of the patient and the medical assessments are conducted by the treating physician. All medical questions are referred to the treating physician.
It is the patient’s responsibility to request additional arrays. Taxpayer replaces batteries once capacity falls below a certain threshold. After initial treatment starts, Taxpayer typically ships arrays and other components directly to patients.
Taxpayer bills the patient’s third party insurance provider, managed care company or, in some cases, the patient directly for Device. If a patient decides to discontinue the therapy, the patient returns Device and any remaining supplies to Taxpayer at Taxpayer’s expense. As the arrays cannot be reused, Taxpayer is responsible for collection and proper disposition of the arrays.

Taxpayer provides a monthly invoice for Device that includes all equipment and transducer arrays in one consolidated charge. You provided a sample invoice (Exhibit B), which reflected the following:

ITEM# DESCRIPTION QTY UNIT PRICE LINE TOTAL
XXXX XXXX XXXX XXXX XXXX

The Food and Drug Administration (“FDA”) issues approvals for new drugs, biological licenses, and pre-market approval (“PMA”) devices. The FDA’s website provides that there are three classes of regulatory control for medical devices. The three device classes are based on the degree of regulatory control necessary to ensure their safety and effectiveness. Medical devices are classified into Class I, II, and III. Regulatory control increases from Class I to Class III. The device classification regulation defines the regulatory requirements for a general device type.

Most Class I devices are exempt from Premarket Notification (510(k)). Most Class II devices require Premarket Notification (510(k)), and most Class III devices require Premarket Approval. Device is a PMA approved device. If a device requires the submission of a Premarket Notification (510(k)), it cannot be commercially distributed until the FDA authorizes it.

The FDA’s website reflects a letter to Taxpayer which is date-stamped April 8, 2011. This letter states, “We are pleased to inform you that the PMA for Device is approved.” The letter further states, “The sale and distribution of this device are restricted to prescription use . . . The device is further restricted . . . insofar as the labeling must specify the specific training or experience practitioners need in order to use the device. FDA has determined that these restrictions on sale and distribution are necessary to provide reasonable assurance of the safety and effectiveness of the device. Your device is therefore a restricted device . . . .”

REQUESTED ADVISEMENT

Taxpayer is seeking guidance on whether its medical Device described above is exempt from Florida’s sales tax.

APPLICABLE LAW AND 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; hypodermic needles; hypodermic syringes; chemical compounds and test kits used for the diagnosis or treatment of human disease, illness, or injury . . . .

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. . . .
(e)Medical products, supplies, and devices are exempt when dispensed to a patient according to an individual prescription written by a licensed practitioner.

Based on the facts provided above, the Device is intended to be used for medical purposes to treat human illness. Additionally, the Device is dispensed to patients pursuant to prescriptions written by licensed practitioners. Therefore, the Device is exempt from Florida’s sales tax as provided in s. 212.08(2)(a), F.S., and Rule 12A-1.020(6)(e), F.A.C., when dispensed to a patient according to an individual prescription.

CONCLUSION

Taxpayer’s Device is exempt from Florida’s sales tax as a medical device when dispensed to a patient according to an individual prescription written by 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: 166679

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