SALT Report 1270 – The Indiana Department of Revenue issued guidance regarding the purchase of medical devices by physicians and hospitals for resale to patients. The Department ruled that these sales are subject to Indiana sales and use tax according to IC 6-2.5-5-18(a) which states:
Sales of durable medical equipment, prosthetic devices, artificial limbs, orthopedic devices, dental prosthetic devices, eyeglasses, contact lenses, and other medical supplies and devices are exempt from the state gross retail tax, if the sales are prescribed by a person licensed to issue the prescription.
In order for these items to be exempt from tax, the item(s) must be sold to a purchaser pursuant to a valid prescription. Subsequently, when these items are sold to a physician or hospital, the device is not sold to someone with a prescription and, therefore, the transaction is not exempt from Indiana sales and use tax.
Sales of kits containing medical devices, and the instruments and supplies needed to implant the devices, are not taxable if:
- The kits are sold for a single price, and
- The purchase price or selling price of the exempt medical items exceeds 50% of the total purchase price or selling price of the kit
In instances where the sales of medical kits do not represent retail transactions, it should be noted that any ordinarily taxable tangible personal property provided in the medical kits may subject the manufacturer or distributor to use tax.
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