Washington – Taxability of Certain Medical Devices

SALT Report 2627 – The Washington Department of Revenue Appeals Division issued a ruling regarding the application of sales and use tax to various medical devices purchased by a group of related hospitals.  Specifically at issue are purchases of Hydro Thermablators, Bipolar Tissue Sealers, Hook Sealing Endoscopies, Cath EP Thermocool, Clearview Mister Blower, and suction canisters.

In 2009, the Department of Revenue audited the Taxpayers’ books and records and concluded that the Taxpayers should have paid retail sales tax on certain purchases because they did not qualify for the exemptions the Taxpayers claimed under RCW 82.08.935 and RCW 82.08.0283.  As a result, the Audit Division issued an assessment, which the Taxpayers paid under protest.

Upon review of the case, the Appeals Division noted that RCW 82.08.935 requires that the Taxpayers devices deliver drugs for human use pursuant to a prescription and in a manner similar to that of a syringe, catheter or tubing.  Although each of the Taxpayers devices deliver saline to a specific area, the Appeals Division determined that the saline as used by the Taxpayers does not meet the requirements of the exemption for the following reasons:

The Hydro Thermablator Kit includes a control unit, rolling cart, a pole, and a fluid heater canister that issued to heat, monitor, and circulate temperature-controlled saline solution through the uterine cavity during endometrial ablations. The Appeals Division determined that although the Hydro Thermablator injects heated saline into the affected area, it does not qualify as a syringe and therefore is not exempt.

The Bipolar Tissue Sealer is used to cauterize ruptured blood vessels during surgery. According to the Taxpayers, the device uses saline to cool the area and prevent burning. However, the device does not introduce saline to the affected area in a way that is similar to that of a syringe, catheter, or tubing and, therefore does not qualify for the exemption.

The purpose of the Hook Sealing Endoscopy is to seal blood vessels and bile ducts to reduce blood loss and bile leaks during surgery.  This device also uses saline to facilitate this function, however the saline is not introduced in a manner similar to that of a syringe, catheter or tubing. Therefore, it does not qualify for the exemption.

The purpose of the Cath EP Thermocool is to enable fluids to be delivered within the catheter to dissipate heat. The device is generally used to treat cardiac arrhythmias and the saline is necessary to help control the temperature of the device so it does not burn the tissue. This device does not qualify for the exemption because the saline that is used to regulate the temperature of the catheter does not function as a syringe, catheter, or tubing.

The Clearview Mister Blower allows the physician to clearly see the surgical site as it keeps the area clear of blood during surgery. Although, saline is used to blow the blood away from the surgical area, the Appeals Division determined that the device does not qualify for the exemption as it does not deliver a prescribed drug for human use by a syringe, catheter, or tubing.  Finally, the Suction canisters do not qualify for the exemption for prosthetic devices because they are not worn in, or on, the body as required by RCW 82.08.0283.

As a result of these findings, the Appeals Division denied the Taxpayers petition and the audit assessment was upheld.

For Further Information

Washington Department of Revenue – Determination #10-0386, 32 WTD 81