Is a permanently implanted Vena Cava Filter — sold as one unit price with its disposable introducer system, sheath/dilator, and guide wire — exempt from Tennessee sales and use tax as a prosthetic device?

Subject

Whether a Vena Cava Filter and its disposable delivery system are exempt as a prosthetic device.

Plain-English summary

The Tennessee Department of Revenue ruled that a Vena Cava Filter — a small permanently-implanted metal device that protects patients with deep vein thrombosis from life-threatening pulmonary embolism — qualifies as an exempt prosthetic device, and that its entire delivery kit (introducer system, sheath/dilator, vascular dilator, and guide wire) is exempt along with it.

Under the Cordis Corp. v. Taylor test, a device is a prosthetic if it replaces a missing body part or augments a natural bodily function. The filter is permanently implanted in the vena cava, where its six legs form a cone-shaped trap that catches blood clots before they can travel to the lungs, while still letting blood flow through — augmenting the pulmonary veins' function by keeping them open and clot-free until the trapped clots naturally dissolve over time. That function-augmenting role satisfies the exemption test, following the same reasoning that made a cardiac pacemaker and a hydrocephalus valve system exempt in Cordis.

The delivery components matter too, because the whole system is sold together for one unit price: the introducer system, sheath/dilator, vascular dilator, and guide wire are all used solely to insert the filter into the vena cava through a vein in the groin or neck, and become "useless and valueless" the moment the filter is released. The Department's standing position is that a disposable delivery mechanism sold together with an exempt device — used only to hold and deliver that device — is treated as a single exempt item rather than being split into a taxable delivery component and an exempt filter component.

What this means for you

Medical device manufacturers selling implantable devices with disposable delivery systems

If your implantable device qualifies as an exempt prosthetic under the Cordis augment-a-function test, a disposable delivery mechanism sold as part of the same unit (not separately) generally rides along with that exemption — the Department treats the delivery hardware and the implant as one item rather than analyzing the delivery components separately, as long as the delivery parts have no independent use or value once the implant is placed.

Accountants and tax professionals

This is a good companion to TN Revenue Ruling 06-13 (ureteral catheters, denied exemption as purely diagnostic tools) — the contrast highlights that the key line is whether the device itself augments a bodily function (here, yes: trapping clots while preserving blood flow) versus merely enabling visualization/diagnosis (there, no). Also useful as precedent for the "disposable delivery mechanism bundled with an exempt device = single exempt item" position the Department applies whenever an implant is sold pre-loaded on delivery hardware for one price.

Common questions

Q: Does a device have to be permanently implanted to qualify as a prosthetic?
A: Permanence isn't the test itself, but here it supports the analysis — the filter augments the pulmonary veins' function on an ongoing basis by trapping clots while letting blood flow through.

Q: Is the disposable introducer system taxable separately from the filter it delivers?
A: No, when it's sold together with the exempt device for one unit price and has no use or value once the device is delivered — the Department treats the whole kit as a single exempt item.

Q: Would the delivery components be taxable if priced and invoiced separately from the filter?
A: The ruling's reasoning turns on the components being sold as a single unit; a separately stated/priced delivery system could raise a different analysis not addressed here.

Q: Does this ruling apply to other implantable medical devices with delivery systems?
A: No. A Tennessee revenue ruling is advisory only and not binding on the Department, even for the taxpayer who requested it, though the augment-a-function test and the bundled-disposable-delivery position are of general use for similar devices.

Citations and references

Statutes and cases:

• Tenn. Code Ann. § 67-6-314(5) (prosthetic/orthotic device sales tax exemption)
• Cordis Corp. v. Taylor, 762 S.W.2d 138 (Tenn. 1988) (prosthetic device test: replaces or augments a missing/reduced bodily function)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/06-15.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING #06-15

WARNING

Revenue rulings are not binding on the Department. This presentation of
the ruling in a redacted form is information only. Rulings are made in
response to particular facts presented and are not intended necessarily as
statements of Departmental policy.

SUBJECT

Whether certain medical devices are exempt from sales and use tax as prosthetic devices.

SCOPE

Revenue rulings are statements regarding the substantive application of law and
statements of procedure that affect the rights and duties of taxpayers and other members
of the public. Revenue rulings are advisory in nature and are not binding on the
Department.

FACTS

Company A (hereinafter the “Taxpayer”) is a manufacturer and distributor of medical
devices. The devices include Vena Cava Filters that are used in individuals diagnosed
with deep vein thrombosis (DVT), a medical condition in which blood clots (thrombi)
form in the veins of the leg. The Taxpayer’s products are primarily sold to physicians,
hospitals, and other medical facilities. The Vena Cava Filter sold by the Taxpayer is a
small metal device designed to protect against a life threatening condition called
pulmonary embolism. Pulmonary embolism is the result of blood clots that are formed in
large deep veins, normally in the legs, traveling through the blood stream to the smaller

veins in the lungs. When these clots reach the smaller veins of the lungs, they block
blood flow to the lungs preventing blood from receiving oxygen. Any factor that alters
the body’s normal blood clotting mechanism can put an individual at risk for DVT.

The Vena Cava Filter is permanently implanted in a large vein, called the vena cava, to
trap the clots, or emboli, and prevent them from reaching the smaller pulmonary veins.
The filter has six legs that are joined together to form a cone that allows the filter to
effectively protect against pulmonary embolism while allowing blood to flow through it.
Over time, a natural process called clot lysis will dissolve the trapped embolus.

A doctor uses a specially designed introducer system to place the filter. The introducer
system is introduced through either a vein in the groin or the neck and then guided to the
vena cava. When the doctor releases the filter from the introducer system, the hooks at
the base of the legs attach securely to the wall of the vena cava, permanently implanting
the filter.

The Vena Cava Filter System is sold as a preloaded filter on the introducer system. The
system is also sold with a sheath/dilator, vascular dilator, and a guide wire which all

accompany the introducer system. All these components of the Vena Cava Filter System
are sold for one unit price.

QUESTION

Are Vena Cava Filter Systems exempt from sales and use tax as prosthetic devices?

RULING
Yes.
ANALYSIS
Under the Retailers’ Sales Tax Act, Tenn. Code Ann. § 67-6-101 et. seq., the sale of
tangible personal property is generally subject to sales and use tax unless an exemption
applies. Several specific exemptions apply to the sale of medical equipment and supplies
including the following exemption for orthotics and prosthetics:'

Tenn. Code Ann. § 67-6-314(5) provides as follows:

There is exempt from the sales tax imposed by the chapter. . .

1 Legislation related to the Streamlined Sales and Use Tax Agreement, effective July 1, 2007, may result in
changes regarding the application of sales and use tax sales of certain items of tangible personal property.
The Department of Revenue encourages you to visit our website at www.tennessee.gov/revenue for
updates.

(5) The sale or repair of prosthetics, orthotics, special molded orthopedic
shoes, walkers, crutches, surgical supports of all kinds, and other similarly
medical corrective or support appliances and devices.

A device is a prosthetic if it replaces a missing body part or augments the performance of
a natural function. Cordis Corp. v. Taylor, 762 S.W.2d 138, 139 (Tenn. 1988). The
court in Cordis held that an implantable cardiac pacemaker is a prosthetic because it
replaces or augments the missing or reduced body function of providing a stimulus for
the beating of a heart. Id. The court also held that a hydrocephalus valve system is a
prosthetic because it is an artificial device that augments the natural flow of cerebral
spinal fluid from the brain into the bloodstream. Id.

The Vena Cava Filter manufactured by the Taxpayer is permanently implanted in the
vena cava to trap the clots or emboli, and to prevent them from reaching the smaller
pulmonary veins. According to the Tennessee Supreme Court’s interpretation of a
prosthetic device in Cordis, devices which replace a body part or augment the
performance of a natural function are considered exempt as prosthetic devices. Since the
Vena Cava Filter augments the function of the pulmonary veins by preventing clots from
the vena cava from blocking the veins and thus keeping the veins open for blood to flow
through them, it qualifies as a prosthetic device under Tenn. Code Ann. § 67-6-314(5).

The introducer system, including the sheath/dilator, the vascular dilator,” and a guide
wire, is considered disposable because it is useless and valueless after the preloaded filter
is delivered. The Department has taken the position that a disposable unit that holds and
delivers an exempt medical device constitutes a single item which qualifies for the
exemption under Tenn. Code Ann. § 67-6-314(5). Based on this reasoning, the introducer
system, including the dilators and guide wire, is also exempt as a prosthetic device.

Deborah A. Toon
Tax Counsel

APPROVED: Loren L. Chumley
Commissioner

DATE: 3/4/06

• The sheath/dilator and the vascular dilator are small tubes that hold the blood vessels open while the Vena
  Cava Filter System is being inserted.