Were disposable perfusion and blood-management supplies sold to hospitals exempt from Florida sales tax?

Subject

Medical Supplies

Plain-English summary

Disposable medical supplies used for one patient were exempt when they carried the required federal prescription legend. The ruling covered items such as tubing, reservoirs, filters, cannulas, suction lines, and blood-management assemblies used by perfusionists in hospital procedures.

The exemption required both one-time use and labeling that restricted sale to or on the order of a licensed practitioner. Reusable heart-lung machines, cell savers, and pumps did not qualify. The seller could refund hospital tax paid consistently with the ruling and take a corresponding credit on its return.

What this means for you

Hospital use alone did not establish exemption. Device reuse and the exact federal prescription restriction were decisive.

Common questions

Q: Were single-use prescription-legend supplies exempt? Yes.

Q: Were reusable clinical machines exempt under this ruling? No.

Q: Could previously collected tax be refunded? Yes, when consistent with the determination.

Citations and references

• Fla. Stat. § 212.08(2)(a) and (k) — prescription medical products and strict construction
• Fla. Admin. Code r. 12A-1.020(6) — medical products and supplies
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-011

Original ruling text

SUMMARY

QUESTION: A company sells disposable, nonreusable, medical
supplies to client hospitals used to perform services.
Examples of nonreusable medical supplies are tubing,
reservoirs, filters, suction lines, and other supplies for
single patient use. Are these items exempt from sales tax?

ANSWER - Based on Facts Below: Disposable medical products
and supplies, qualify for exemption under s. 212.08(2)(a),
F.S., and Rule 12A-1.020 F.A.C. However, in order to be
exempt, the items must be for single patient use and must
contain the federal warning restricting their sale by or on
the order of a licensed physician.

Feb 12, 2001

Re: Technical Assistance Advisement 01A-011
Sale & Use Tax - Medical Supplies
Statute: Section 212.08, F.S.
Rule: 12A-1.020, F.A.C.

Dear :

This response is in reply to your letters dated October 25, and
December 7, 2000, and several telephone conversations requesting
the Department's issuance of a Technical Assistance Advisement
("TAA") pursuant to s. 213.22, F.S., and Chapter 12-11, F.A.C.,
regarding the referenced matter and parties. An examination of
your petition has established that you have complied with the
statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for
issuance of a TAA.

FACTS AND REQUESTED ADVISEMENT

Your letter provides, in pertinent part:

We are Contract Medical Service Provider and Medical Supply
retailer authorized to conduct business in the state of
Florida. The primary two services the company provides are
Perfusion Services and Autotransfusion Services. Each
individual hospital will elect which type of services or
procedures it requires the company to perform. The
hospital contracts may call for any three of the below
listed services and products or any combination thereof.
Professional Services, Medical Equipment Rental and sales
of Medical Devices that are disposable in nature.

Business Description:

Professional Services

The company provides Perfusionists (our employees) to
hospitals on a per case basis. Perfusionists are trained
to assist in open heart surgical procedures. The
Perfusionist is a member of the open heart surgical team
and works under the direction of the Chief Surgeon.

Medical Equipment

The company provides clinical medical equipment to
hospitals whose Agreements specifically call for such
provisions. The equipment rental charge is a separate line
item in the billing arrangements. The company owns all of
the clinical medical equipment it rents to hospitals.
Examples of equipment are heart lung machines, cell savers,
and pumps.

Medical Devices

The company sells disposable, nonreusable, medical supplies
to client hospitals used to perform the services. These
supplies are a separate line item in the billing
arrangements separate from the professional service charge.
All of these devices are labeled with a warning that states
that federal law prohibits the use of these devices without
the prescription of a licensed physician. Examples of
nonreusable medical supplies are tubing, reservoirs,

filters, cannulas, suction lines, and assemblies for blood
management and processing.

Request for Technical Assistance Advisement:

One of our client "for profit" hospitals has hired a tax
firm in Florida to seek a sales tax refund from us for
billings that date back from the periods 1997 and 1998.
The tax firm claims that sales tax should be exempted based
on two reason:

(1) [O]ur company is providing "professional services" and
sales tax should not be applied.

(2) Due to section 212.08(2)(a)[, F.A.C., which] provides:
"There shall be exempt from 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...["]

Also Florida Administrative Code Rule [12A-]1.020 provides:
"(6)(a) Medical products and supplies used in the cure,
mitigation, alleviation, prevention, or treatment of
injury, illness, disease, or incapacity are taxable unless:

1. Temporarily or permanently incorporated into a patient
   or client by a [practitioner of the healing arts
   licensed by] the State of Florida.

2. Ordered and dispensed by or on the prescription of a
   duly licensed practitioner authorized by the laws of
   the state to prescribe medicinal drugs; or

3. Ordered and dispensed by a pharmacist pursuant to the
   established dispensing procedures determined by the
   joint committee of medical, osteopathic and pharmacy
   professions as created by section 465.186, F.S."

The tax firm claims that "The Florida Department of Revenue
has interpreted the above statute and rule to mean that

medical products qualify for the exemption under s.
212.08(2)(a), F.S., and Rule 12A-1.020, F.A.C., when they
are for single patient use and contain the federal warning
restricting their sale by or on the order of a licensed
physician (see Technical Assistance Advisement 99A-024R).
Any supplies that may be transferred in connection with the
perfusion services should meet both of these criteria."

We are asking your assistance in determining if a refund is
appropriate with consideration to the following facts:

The medical supplies we sell are disposable such as tubing,
cannulas, filters, catheters, adapters, reservoirs, and
assemblys. Note that the disposable supplies were
separately stated from the services and taxed accordingly.
A copy of a letter from a Senior tax specialist from the
Florida Department of Revenue verifies the taxability of
our products and provisions on the collection of sales tax
from the client hospitals if separately stated on the
billing invoices. We have not been supplied with a resale
certificate from the hospital. Finally upon reviewing a
Technical Assistance Advisement 99A-071 we were confident
in the continued obligation to collect and report sales tax
on our disposable nonreusable products (which do contain
the federal warning labels "CAUTION: Federal law restricts
this device to sale by or on the order of a physician")
billed to our "for profit" client hospitals.

APPLICABLE LAW, DISCUSSION, AND ANALYSIS

Section 212.08, F.S., provides in pertinent part:

(2) EXEMPTIONS; MEDICAL.(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; hypodermic needles; hypodermic
syringes; chemical compounds and test kits used for the
diagnosis or treatment of human disease, illness, or
injury; and common household remedies recommended and

generally sold for internal or external use in the cure,
mitigation, treatment, or prevention of illness or disease
in human beings, but not including cosmetics or toilet
articles, notwithstanding the presence of medicinal
ingredients therein, according to a list prescribed and
approved 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. There shall also be exempt from the tax imposed by
this chapter artificial eyes and limbs; orthopedic shoes;
prescription eyeglasses and items incidental thereto or
which become a part thereof; dentures; hearing aids;
crutches; prosthetic and orthopedic appliances; and
funerals....

(k) This subsection shall be strictly construed and
enforced.

Rule 12A-1.020 F.A.C., provides in pertinent part:

(6)(a) Medical products and supplies used in the cure,
mitigation, alleviation, prevention or treatment of injury,
illness, disease or incapacity are taxable, unless:

1. Temporarily or permanently incorporated into a patient
   or client by a
   practitioner of the healing arts licensed by the State of
   Florida.

2. Ordered and dispensed by or on the prescription of a
   duly licensed practitioner authorized by the laws of the
   state to prescribe medicinal drugs; or

3. Ordered and dispensed by a pharmacist pursuant to the
   established dispensing procedures determined by the joint
   committee of medical, osteopathic and pharmacy professions
   as created by section 465.186, F.S.

(b) The sale of medical products or supplies to physicians,
dentists, veterinarians and hospitals is taxable even
though the medical products or supplies may be used in

connection with medical treatment, unless the products and
supplies are specifically exempt from tax under this rule
or in Rule 12A-1.021, F.A.C.

Section 212.08(2)(a), F.S. provides an exemption for medical
products and supplies, or medicines, which are dispensed
according to an individual prescription or prescriptions written
by a prescriber authorized by law to prescribe medicinal drugs.
Included within the scope of this exemption are those disposable
supplies used by a Perfusionist, which meet both of the
following criteria: (a) they are intended for one-time use; and
(b) they are required under federal law to bear a prescription
legend that reads either "RX only," or "CAUTION: Federal law
restricts this device to sale by or on the order of a _"
[designation of a licensed health care practitioner authorized
to use or order use of the device]. The exemption does not
extend to prescription legend devices that are intended to be
re-usable, and thus would not be applicable to items such as
heart lung machines, cell savers, or pumps.

CONCLUSION

Medical products and supplies, such as the disposable supplies
used by a Perfusionist, qualify for exemption under s.
212.08(2)(a), F.S., and Rule 12A-1.020 F.A.C. However, in order
to be exempt, the items must be for single patient use and must
contain the federal warning restricting their sale by or on the
order of a licensed physician. Accordingly, you may refund the
sales tax paid by your hospital client, where consistent with
this determination and take a corresponding credit on your
company's return.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the 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. You are advised that subsequent statutory and
administrative rule changes or that judicial interpretations of
the statutes or rules upon which this advice is based may
subject similar future transactions to a different treatment

than expressed in this response.

You are further advised that this response and your request 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.

Sincerely,

Michael T. Cavanaugh
Tax Law Specialist
Technical Assistance and Dispute Resolution
850-922-9411

Enclosure
Control #42925