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Sales and Use Tax – 16A-006 – Human Tissue

QUESTIONS:

  1. ARE THE REVENUES OF TAXPAYER ASSOCIATED WITH THE TRANSFER OF HUMAN TISSUE FOR USE IN HOSPITALS SUBJECT TO THE TAX IMPOSED UNDER CHAPTER 212, F.S.?
  2. ARE THE AMOUNTS PAID FOR THE ACQUISITION OF HUMAN TISSUE FOR PROCESSING AND DISTRIBUTION FOR USE IN HOSPITALS SUBJECT TO THE TAX IMPOSED UNDER CHAPTER 212, F.S.?

ANSWERS:

  1. THE REVENUES OF TAXPAYER ASSOCIATED WITH THE TRANSFER OF HUMAN TISSUE FOR USE IN HOSPITALS ARE NOT SUBJECT TO THE TAX IMPOSED UNDER CHAPTER 212, F.S.
  2. THE AMOUNTS PAID BY TAXPAYER AUTHORIZED BY S. 873.01(3)(B), F.S., AS REASONABLE COSTS FOR THE ACQUISITION OF HUMAN TISSUE FOR PROCESSING AND DISTRIBUTION FOR USE IN HOSPITALS, ARE NOT SUBJECT TO THE TAX IMPOSED UNDER CHAPTER 212, F.S.

May 25, 2016

Re: Technical Assistance Advisement – TAA 16A-006 XXXXX (“Taxpayer”) Florida Sales and Use Tax
Human Tissue
Sections, 212.05(1)(i), 873.01, Florida Statute (F.S.) BP#: XXXXX

Dear XXXXX:

This letter is in response to your request dated XXXXX, and received in this office on XXXXX, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning the taxability of machinery and equipment. An examination of your request has established you complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.

FACTS PRESENTED

Taxpayer currently operates a tissue bank located in XXXXX, XXXXX. Specifically it is a biotechnology company focused on the development and commercialization of a suite of products designed to address market needs with product applications across various collagen repair markets. Currently, Taxpayer has a comprehensive portfolio of human tissue products it processes that include both human amniotic-derived tissues and a variety of musculoskeletal tissues.

All of Taxpayer’s products are registered with the US Food and Drug Administration under the regulations in 21 CFR Part 1271 as human tissue products.

The National Organ Transplant Act (“NOTA,” 42 U.S.C. §274 et seq.) makes it unlawful for “any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation ....” 42 U.S.C. §274e.(a). As used in NOTA, the term “valuable consideration” does not include the “reasonable payments associated with the removal, transportation, implantation, processing, preservation, quality control, and storage of a human organ....” Similarly, s. 73.01, F.S., prohibits the sale, purchase or transfer of human organs or tissue for valuable consideration making such a transaction a second degree felony. 42 U.S.C. §274e.(c)(2)., s. 873.01, F.S.

Amounts paid to Taxpayer are for the use of its technology in the processing and transfer of human tissue to hospitals both in and outside the state of Florida. Payments made to the suppliers of the donor tissue and related items are made for the reimbursement of the harvesting, handling, and transportation costs of the supplying entity.

REQUESTED ADVISEMENT

1. Are the revenues of Taxpayer associated with the transfer of human tissue for use in hospitals subject to the tax imposed under Chapter 212, F.S.?

2. Are the amounts paid for the acquisition of human tissue for processing and distribution for use in hospitals subject to the tax imposed under Chapter 212, F.S.?

TAXPAYER’S DETERMINATION

Taxpayer asserts that the transactions at question, procurement, processing, and distribution of human tissue, are not the sale of tangible personal property, but the reimbursement of costs associated with accepted tissue services. Tissue transfer services are not services subject to the tax referenced in Chapter 212 F.S. Only services enumerated in s. 212.05(1)(i), F.S., are subject to Florida sales and use tax. As such, Taxpayer asserts that the charges for tissue procurement and the charges for tissue distribution are not subject to Florida sales and use taxation.

APPLICABLE LAW AND DISCUSSION

The sale of human organs and/or tissue for “valuable consideration” is prohibited by state and federal law. Taxpayer asserts it will conduct its business activities within the confines of state and federal law.

Therefore, in accordance with statutory authority, only “reasonable payments” will be made by Taxpayer to its supplier. The payments are limited to the costs associated with the supplier’s use of technology in the processing and transfer of the human tissue to Taxpayer’s Florida location. A review of the contract submitted by Taxpayer echoes the limited conditions under which consideration will flow between the parties. Accordingly, it is the Department’s position that the acquisition and transfer of human tissue within the confines of state and federal law are not sales of the human tissue, and given there is no sale of the human tissue, there is no sales or use tax due on the transaction between Taxpayer and its supplier.

Regarding taxable services, the only services, in Florida, that by themselves are subject to Florida sales and use tax are those enumerated in s. 212.05(1)(i), F.S.1 The Department agrees Taxpayer’s business activities are not subject to taxation under the referenced provision.

CONCLUSION

  1. The revenues of Taxpayer associated with the transfer of human tissue for use in hospitals are not subject to the tax imposed under Chapter 212, F.S.
  2. The amounts paid by Taxpayer authorized by s. 873.01(3)(b), F.S., as reasonable costs for the acquisition of human tissue for processing and distribution for use in hospitals, are not subject to the tax imposed under Chapter 212, F.S.

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 and 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 15 days of the date of this letter.

Kind Regards,

Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution 850-717-6735

ARF\tmk
Record ID: 209976

End Notes:

1. Detective, burglar protection, and other protection services; nonresidential cleaning services; and nonresidential building pest control services.

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