Are audiometers exempt from Missouri sales tax under the hearing aid exemption?

Plain-English summary

The Missouri Department of Revenue ruled that audiometers -- the instruments used to test a patient's hearing across various sound frequencies -- do not qualify for Missouri's sales tax exemption for hearing aids and hearing aid supplies. Applicant uses audiometers in its business to test patients for possible hearing aids, and asked whether those devices fall under the exemption in Section 144.030.2(18), RSMo, since that exemption already covers hearing aids and hearing aid supplies.

The Department said no. Section 144.030.2(18), RSMo, exempts insulin and durable medical equipment, prosthetic devices, and other items as defined by the federal Medicare program, "including the items specified in Section 1862(a)(12)" of the Social Security Act, and it also specifically calls out hearing aids and hearing aid supplies. An audiometer, however, is a diagnostic instrument used to measure hearing acuity -- it is not itself a hearing aid, and it is not a supply used with a hearing aid. Because it doesn't fit either category, the exemption doesn't reach it, and audiometers are subject to Missouri sales tax like any other taxable tangible personal property under Section 144.020.1, RSMo.

The Department also addressed what happens if Applicant buys an audiometer from an out-of-state vendor: in that case, Missouri's compensating use tax under Section 144.610, RSMo, applies instead of sales tax, at the same rate.

What this means for you

Audiologists, hearing clinics, and hearing aid dispensers

If your business buys audiometers or similar hearing-testing equipment, this ruling indicates you should expect to pay Missouri sales tax (or use tax, if bought from an out-of-state vendor) on that purchase. The exemption for hearing aids and hearing aid supplies in Section 144.030.2(18), RSMo, does not extend to diagnostic testing equipment just because it's used in the same practice or toward fitting a hearing aid -- the exemption is limited to the hearing aid itself and its supplies.

Buyers sourcing equipment from out-of-state vendors

Don't assume that buying an audiometer from an out-of-state seller avoids Missouri tax. The ruling makes clear that such purchases are instead subject to Missouri's compensating use tax under Section 144.610, RSMo, at the rate equivalent to the sales tax that would otherwise apply.

Accountants and tax professionals

When evaluating whether a piece of medical or diagnostic equipment qualifies for Missouri's Section 144.030.2(18) exemption, look at whether the item itself is a hearing aid or a supply used specifically with one -- not merely whether it's used in a hearing-related practice or serves a diagnostic purpose connected to hearing aids. Devices that test, measure, or diagnose (rather than function as the aid itself) fall outside the exemption's plain language.

Common questions

Q: Are audiometers exempt from Missouri sales tax as hearing aid supplies?
A: No. The Department ruled that audiometers are not hearing aids and are not supplies for hearing aids, so they do not qualify for the exemption in Section 144.030.2(18), RSMo, even though they're used to test patients for possible hearing aids.

Q: Why does the hearing aid exemption not cover audiometers?
A: Section 144.030.2(18), RSMo, exempts durable medical equipment, prosthetic devices, and specifically "hearing aids and hearing aid supplies." An audiometer is defined as an instrument for measuring hearing acuity -- a diagnostic testing device, not a hearing aid or an accessory/supply used with one. Because it doesn't match either exempt category, ordinary sales tax under Section 144.020.1, RSMo, applies.

Q: What if the audiometer is purchased from an out-of-state vendor?
A: Then Missouri's compensating use tax under Section 144.610, RSMo, applies instead of sales tax, at an amount equivalent to the sales tax rate.

Q: Can other hearing clinics or audiologists rely on this ruling?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and law remain unchanged. Any other taxpayer should confirm their own facts match and consult a tax professional before relying on this result.

Q: Does this ruling affect the taxability of actual hearing aids?
A: No. The ruling doesn't disturb the existing exemption for hearing aids and hearing aid supplies under Section 144.030.2(18), RSMo -- it only clarifies that audiometers, as testing instruments, fall outside that exemption.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8237

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated December 20, 2022.

The facts as presented in your letter ruling request are summarized as follows:

Applicant uses items called "audiometers" in their business to test patients for possible hearing aids. Sales of hearing aids and hearing aid supplies are exempt from Missouri sales tax per section 144.030.2(18), RSMo. Applicant is unclear on whether or not audiometers are covered under the same exemption.  An audiometer is 'an instrument used in measuring the acuity of hearing in the individual ear for sounds of various frequencies especially with a view to detecting departures from normal hearing.' Meriam Webster's Collegiate Dictionary 142-143, (10 th ed. 1993).

ISSUE :

Does the sales tax exemption found in section 144.030.2(18) for hearing aids and hearing aid supplies include "audiometers?"

RESPONSE :

No. Audiometers do not qualify for the sales tax exemption found in 144.030.2(18).

Section 144.020.1, RSMo, provides:

A tax is hereby levied and imposed...upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.

However section 144.030.2(18), RSMo, exempts:

All sales of insulin, and all sales, rentals, repairs, and parts of durable medical equipment, prosthetic devices [...] as defined on January 1, 1980, by the federal Medicare program pursuant to Title XVIII of the Social Security Act of 1965, including the items specified in Section 1862(a)(12) of that act, and also specifically including hearing aids and hearing aid supplies[.]

Audiometers are not hearing aids, or supplies for hearing aids, therefore they do not qualify for the exemption under section 144.030.2(18), RSMo, for transactions in Missouri.

Additionally, section 144.610, RSMo, provides:

A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property, excluding motor vehicles, trailers, motorcycles, mopeds, motortricycles, boats, and outboard motors required to be titled under the laws of the state of Missouri and subject to tax under subdivision (9) of subsection 1 of section 144.020, purchased on or after the effective date of sections 144.600 to 144.745 in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020.

Therefore, audiometers purchased from out-of-state vendors are subject to the compensating use tax law imposed under section 144.610, RSMo.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford