Washington – Taxability of a Monitoring Device Used in Kidney Dialysis

SALT Report 2626 – The Washington Department of Revenue Appeals Division issued a ruling regarding the taxability of a monitoring device used during kidney dialysis treatments.  The device is a monitoring tool used to analyze a patient’s blood flow through the dialyzer so the clinician can adjust the dialysis machine to optimize the effectiveness of the dialysis treatments.

In this particular case, the Taxpayer claimed a sales tax exemption for this device on several quarterly returns.  The Department disallowed the exemption claiming that the device is considered durable medical equipment, which is not deductible from the retail sales tax under RCW 82.08.0283.  As a result, the Department issued a notice of balance due, and the Taxpayer filed an appeal for re-determination.

Upon review of the case, the Appeals Division stated that although the monitoring device is in fact durable medical equipment and is not exempt under the regulation noted above, it does, however, qualify for an exemption under RCW 82.08.945.  This regulation provides that, “The tax levied by RCW 82.08.020 shall not apply to sales of kidney dialysis devices, including repair and replacement parts, for human use pursuant to a prescription. In addition, the tax levied by RCW 82.08.020 shall not apply to charges made for labor and services rendered in respect to the repairing, cleaning, altering, or improving of kidney dialysis devices.”

As a result, the Division ruled that because the monitoring device is used to analyze a kidney dialysis patient’s blood flow through the kidney dialyzer it is an “integral accessory and part of the device prescribed to treat renal failure” and, therefore, qualifies as a kidney dialysis device exempt from sales tax.

Further, the Division stated that although the device meets the definition of “durable medical equipment,” which is taxable in the State, the definition of “kidney dialysis device” more accurately described the Taxpayer’s product.  Accordingly, the Appeals Division ruled in favor of the Taxpayer and dismissed the notice of balance due.

For Further Information

Washington Department of Revenue – Tax Determination No. 11-0129