Was a computer-based real-time hearing and communication device exempt from Florida sales tax?

Subject

Hearing Assistance Devices

Plain-English summary

The communication system was exempt only when sold under a licensed physician's prescription. Florida found that the device qualified as a prosthetic or orthopedic appliance because it alleviated a body-part malfunction and helped deaf users communicate through synchronized auditory, visual, sign-language, and text output.

The Department did not find that the system itself met the common definition of a hearing aid, and it was not on the exempt medical-product list. A retail sale without the required prescription was therefore taxable.

What this means for you

Medical function alone did not create an unconditional exemption. The product's legal category and prescription documentation determined the result.

Common questions

Q: Did the device qualify as a prosthetic or orthopedic appliance? Yes.

Q: Was every sale exempt? No.

Q: What was required for exemption? A prescription issued by a licensed physician.

Citations and references

• Fla. Stat. § 212.05(1)(a) — tax on tangible personal property
• Fla. Stat. § 212.08(2) — medical, hearing-aid, prosthetic, and orthopedic exemptions
• Fla. Admin. Code r. 12A-1.021(1)(a) — prosthetic and orthopedic appliances
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-053

Original ruling text

SUMMARY

QUESTION: What is the taxable status of a hearing
assistance device which translates speech into three
streams of data that are simultaneously delivered to the
deaf person in auditory, visual and text format, all in
real-time?

ANSWER - Based on Facts Below: The device would qualify as
a prosthetic or orthopedic appliance used to alleviate the
malfunction of a body part; however, it would be exempt
from sales tax only when it is sold pursuant to a
prescription issued by a licensed physician.

Oct 05, 2000

Re: Technical Assistance Advisement 00A-053
XXX ("company")
Sales and Use Tax
Hearing Assistance Devices
Section 212.08(2)(a) & (b), F.S.
Rules 12A-1.020, 12A-1.002, F.A.C.

Dear :

This is in response to your letter of June 30, 2000, in which
you request the issuance of a Technical Assistance Advisement
regarding the taxable status of the product named the XXX
(referred to hereafter as either "device" or "product.")

Your letter provides in pertinent part:

The [device] translates speech into three streams of data
that are simultaneously delivered to the deaf person in
auditory, visual and text format, all in real-time. These
three streams of data are synchronized and conveyed
visually (through printed words and video-clips of signed
exact English onto a computer screen), and verbally (as the

speaker's voice is replaced with a computerized voice that
is transmitted through an output cord into the hearing aid,
FM hearing aid, or cochlear implant, thus eliminating
normal background noise and enabling the deaf person to
better discriminate the speaker's words).

These three data streams are synchronized in the following
order. The [device] first converts the speaker's words
using a conventional software application. Next the
speaker's words are converted to sign language using 12,500
digital movie images. Simultaneously the speaker's words
are converted to computer-generated speech for input into
hearing aids, FM hearing aids and/or cochlear implants or
other output devices such as speakers or cell phones. The
device is also capable of functioning as a telephone for
the deaf.

The [device] allows two-way communication between hearing
persons (who do not know sign language) and those deaf
persons who are unable to hear or speak intelligibly (i.e.,
those who often rely upon sign language to communicate).
After the message is received the deaf person simply types
his response into the computer and then directs the
computer to "talk". The computer translates the typed words
into a computer voice, and then "speaks" what has been
typed to the hearing person, thereby creating conversation.

In order to function properly and translate in "real time"
the [device] software requires a high-end computer. No
proprietary hardware is required. Detailed specifications
for both the laptop and desktop computers are set forth in
the attached materials. The system requires, at the very
minimum, an Intel(R)Pentium(R)III Processor 650 -- 700 MHz,
a 256k integrated full speed L2 cache, a memory of 128 MB
SDRAM, a 10GB hard drive with specified graphics, and
wireless microphone peripherals and speakers.

Computers with less processor power are not able to
accurately translate the speech and sign language in real
time (which is an essential function of this device).
Moreover, [company] has determined that some computers,

which ostensibly meet the above requirements, are still
inadequate to run the system because certain critical
components are of lesser quality and do not allow the rapid
processing of the data. Therefore, at the present time the
[device] has been sold as part of high-end Compaq laptop
and desktop computers that meet the above
specifications....
...
At present the [device] is used primarily for day to day
communications between deaf persons and other hearing
persons, such as their doctors, dentists, bankers, family,
and friends, and for the education of deaf and hard of
hearing persons. Of course, there are many other public
uses of the [device] that will enable the deaf and hard of
hearing to fully participate in all aspects of life....
...
[Company] suggests that there are at least two bases upon
which to grant an exemption from sales and use tax. First,
the [device] is an extension of the hearing aid, the FM
hearing aid, and/or the cochlear implant, all of which are
exempt from taxation pursuant to Section 212.08, F.S.
Under this rationale, the [device] temporarily attaches to
and becomes an extension of the deaf person's hearing aids,
FM hearing aids, or cochlear implant. When attached to the
aids or implant, the [device] is translating the speaker's
voice into the computer, removing the background noise, and
converting the human voice into a more audible format,
thereby making it easier for the deaf person to
discriminate and understand what is being said.

Second, the [device] is a prosthetic device as defined in
Section 212.08(2), F.S. The [device] is used to
substitute for normal hearing and speech, to alleviate the
malfunction of the ear (which is usually caused by auditory
nerve damage), and to assist the deaf and hard of hearing
in leading a normal life by making it possible for them to
communicate with all hearing persons without the aid of a
human interpreter. In this context, mobility means that
the device enables deaf persons to interact independently
and privately with all hearing persons in every aspect of
their life.

Relevant Statutes and Rules

The sale of tangible personal property is subject to sales tax,
unless such sale is specifically exempt. Section 212.05(1)(a),
F.S. Section 212.08(2), F.S., which governs medical exemptions,
provides as follows:

(a) There shall be exempt from the tax imposed by this
chapter any medical products and supplies or medicine
dispensed according to an individual prescription or
prescriptions written by a prescriber authorized by law to
prescribe medicinal drugs;.... There shall also be exempt
from the tax imposed by this chapter... hearing aids;...
prosthetic and orthopedic appliances;...

(b) For the purposes of this subsection:

1. "Prosthetic and orthopedic appliances" means any
   apparatus, instrument, device or equipment used... to
   alleviate the malfunction of any part of the body,....
   Such apparatus, instrument, device, or equipment shall be
   exempted according to an individual prescription or
   prescriptions written by a physician licensed under chapter
   458, chapter 459, chapter 460, chapter 461, or chapter 466,
   or according to a list prescribed by the Department of
   Health, which list shall be certified to the Department of
   Revenue from time to time and included in the rules
   promulgated by the Department of Revenue. (Emphasis
   supplied)

Rule 12A-1.021, F.A.C., provides in part:

(1)(a) Prosthetic and orthopedic appliances are exempt. The
term "prosthetic and orthopedic appliances" means any
apparatus, instrument, device, or equipment used to replace
or substitute for any missing part of the body, used to
alleviate the malfunction of any part of the body, or used
to assist any disabled person in leading a normal life by
facilitating such person's mobility. Such apparatus,
instrument, device, or equipment shall be exempted

according to an individual prescription or prescriptions
written by a duly licensed practitioner.... (Emphasis
supplied)

DEPARTMENTAL RESPONSE

The device appears to qualify as a prosthetic or orthopedic
appliance used to alleviate the malfunction of a body part;
however, it would be exempt from sales tax only when it is sold
pursuant to a prescription issued by a licensed physician. Your
request has not provided, nor has our research been able to
ascertain, that the device meets the common definition of a
"hearing aid." Additionally, the device is not on the list
(authorized to be issued under Section 212.08(2), F.S.) of
specifically exempt medical products or orthopedic appliances.
Therefore, when sold at retail without a prescription, the
product would be subject to sales tax.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S. which is binding on the department only
under facts and circumstances described in the request for this
advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. Subsequent statutory or administrative rule changes or
judicial interpretations of the statutes or rules upon which
this advice is based may subject future transactions to a
different treatment than expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other
details which might lead to identification of the taxpayer must
be deleted by the Department before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,

Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4840

Control #41831