SALT Report 1303 – The Washington Department of Revenue denied a taxpayer’s request for a sales tax refund for Continuous Positive Air Pressure (CPAP) and Bi-level Positive Air Pressure (BiPAP) devices used in the treatment of sleep apnea and other respiratory conditions because they did not qualify as “prosthetic” or “orthotic” devices under the applicable statutes.
During the first part of the audit period, 2001 through 2004, Washington exempted both prosthetic devices and orthotic devices but did not provide a statutory definition of the items. However, according to medical dictionaries prosthesis is “an artificial device [used] to replace a missing part of the body.” As such, neither the CPAP nor the BiPAP device can be considered a prosthetic device since they are not used as a substitute for missing body parts.
During that same time period, a CPAP or BiPAP device did not qualify as an orthotic device either. The legislative statute enacting the exemption described an orthotic device as something “used to support or control a part of the body” and the medical dictionaries used to define the term state that an orthotic device relates to the musculoskeletal system, not the respiratory system.
For the second part of the audit period which occurred during the latter half of 2004, only the exemption for prosthetic devices was still available. During this time, the Washington Legislature adopted a statutory definition for all prosthetic devices in order to conform to the Streamlined Sales and Use Tax Agreement (SSUTA). Effective July 1, 2004 the SSUTA states that a CPAP that is worn on the body is an exempt prosthetic device however; a CPAP that is not worn on the body is considered taxable durable medical equipment.
The final ruling was based on the fact that all the devices the taxpayer sold during this period were taxable since they were required to be plugged in, as opposed to battery-operated, and could not be worn on the body.
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