SALT Report 1892 – The Washington Department of Revenue issued a ruling regarding whether a Taxpayer’s sales of medical equipment were liable for sales tax. The Taxpayer is a medical equipment provider that leases and sells orthotic and prosthetic devices, medically prescribed braces, and durable medical equipment, such as crutches and infusion pumps to patients through hospitals, clinics, and doctors.
Specifically at issue in this case are two medical devices that the Taxpayer contends qualify as prosthetic devices. The first device provides cold compression therapy to injured joints and limbs. The second device provides electronic stimulation to promote bone growth.
The cryotherapy device requires a doctor’s prescription and is generally used following surgery on, or injury to, a joint or limb. It simultaneously supplies intermittent compression and adjustable cold therapy. The device is composed of two parts, a wrap that fits over the injured joint or limb and a control unit. The control unit allows the patient to adjust the temperature and pressure being administered to the limb or joint.
The second medical device uses a pulsed electromagnetic field to encourage bone repair and bone fusion. When a human bone is fractured, it generates a low-level electrical field, which activates the body’s own repair mechanism. In some cases, the broken bone does not generate a sufficient electric field. This device generates an electromagnetic field similar to the electrical field that the body generates. Applying the device directly to the fusion or fracture sites helps activate body’s natural healing process and enhances bone fusion immediately following an injury or surgery. The device can also be used as a non-invasive treatment to salvage a failed spinal fusion
Washington tax law RCW 82.08.0283 provides an exemption for sales of certain prosthetic devices. These devices are defined as replacement, corrective, or supportive devices worn on or in the body to:
- Artificially replace a missing portion of the body,
- Prevent or correct a physical deformity or malfunction, or
- Support a weak or deformed portion of the body
The Department determined that the Taxpayer’s cryotherapy device did not qualify for the exemption because it is not “worn in or on the body.” Portions of the device are wrapped around the injured body part however, the term “worn on or in the body” requires that the entire device or system be worn on the person, “to be carried with and habitually become part of the person as a whole.”
However, the Taxpayer’s bone growth stimulating device did fall within the exemption for prosthetic devices as it is worn entirely on the body. The device is comprised of a control unit and a treatment transducer, both of which are worn directly on the torso or the neck.
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