Can the Utah Tax Commission give a product-by-product ruling on whether a manufacturer's line of electrotherapy medical devices (TENS-type pain units, muscle stimulators, biofeedback systems, and similar equipment) qualifies for the home medical equipment sales tax exemption?

Plain-English summary

A manufacturer already registered and collecting Utah sales tax asked the Tax Commission for a written opinion on the taxability of its full product line of electrotherapy medical devices -- TENS-type units for chronic/acute pain, muscle stimulators for rehabilitation, biofeedback systems, a device for in-home treatment using an internal electrode, an iontophoresis drug-delivery system, a dynamic splint, and a cervical traction unit, plus related accessories (electrodes, batteries, gels, skin care products). The products are sold, rented, or rented-then-converted-to-sale to patients under prescription, and sometimes sold to clinics or doctors who use them in-office or resell them to patients.

The Commission declined to rule item by item. It explained that "the nature of the item does not, by itself, determine its eligibility for exemption." Instead, each transaction must independently satisfy:

1. The item is prescribed by a medical doctor;
2. It is necessary for the treatment of a medical illness or injury, or to mitigate an impairment from illness or injury; and
3. It is eligible for payment under Medicare or state Medicaid guidelines.

The Commission specifically flagged that Medicare/Medicaid eligibility often depends on the individual patient's circumstances, not just the product itself -- meaning the same device could be exempt for one patient's covered condition and taxable for another's. It also reiterated the separate rule (echoed across related Utah rulings) that medical equipment sold or rented to a hospital, clinic, doctor, nurse, or other health care provider for use in their own professional practice does not qualify for the exemption, regardless of the product.

Rather than leave the manufacturer without guidance, the Commission offered two practical paths: (1) contact the Commission for help determining Medicare/Medicaid qualification on a specific sale or rental to a Utah patient who otherwise meets the criteria, or (2) collect and remit sales tax on the sale/rental as a default, and direct the patient to seek a refund from the Commission if the item turns out to qualify for exemption.

What this means for you

Medical device manufacturers and distributors with diverse product lines

Don't expect a state tax authority to pre-clear an entire catalog as exempt or taxable. Because eligibility often turns on facts about the individual patient (prescription, medical necessity, and Medicare/Medicaid coverage), plan to make -- and be ready to defend -- a taxability determination transaction by transaction, or default to collecting tax and letting exemption claims flow through a refund process.

Sellers uncertain whether a specific sale qualifies

This ruling's suggested fallback (collect tax now, patient requests refund later if the item proves exempt) is a practical, low-risk default when you can't get advance certainty -- it avoids under-collecting on a transaction that turns out to be taxable.

Accountants and tax professionals

Cite this ruling when a client medical-device business asks for a "yes across the board" answer -- the Commission's own position is that the home medical equipment exemption is inherently transaction-specific (prescription + medical necessity + Medicare/Medicaid fit), consistent with the physician-ownership distinction reached on stricter facts in PLR 95-021 and PLR 96-139.

Common questions

Q: Will the Utah Tax Commission pre-approve my whole medical device product line as tax-exempt?
A: Not based on this ruling -- it declined to make a blanket determination and instead described the three-part, transaction-specific test that must be applied to each sale.

Q: Does Medicare/Medicaid eligibility depend only on the type of device?
A: No -- per this ruling, it often depends on the individual patient's circumstances, not just the product.

Q: What if I can't tell in advance whether a sale qualifies?
A: The Commission suggested collecting and remitting tax by default and letting the patient seek a refund later if the item proves exempt, or contacting the Commission for help on a specific transaction.

Q: Does selling to a doctor or clinic for their own use ever qualify for the exemption?
A: No -- equipment sold or rented to a health care provider for use in their own professional practice is excluded from the home medical equipment exemption regardless of the device.

Q: Can I rely on this ruling for my own product line?
A: Not automatically -- it binds the Commission only for the taxpayer, and even for that taxpayer it expressly avoided resolving specific products, so it functions more as general guidance than a definitive determination.

Citations and references

No specific statute or rule section is quoted verbatim in the surviving text of this ruling; the three-part test described above (prescription, medical necessity, Medicare/Medicaid eligibility) is drawn from the Commission's own summary of the home medical equipment exemption criteria, consistent with the fuller five-part test discussed in PLR 95-021.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/96-112.pdf

Original ruling text

96-112

Response
July 18, 1996

Request

Utah
State Tax Commission

210
North 1950 West

Salt
Lake City, Utah 84134

RE:
Sales taxability of XXXXX's products

Dear
Sir/Madam:

XXXXX
is currently registered, collecting, and remitting sales tax in your state.
However, review of the statutes and regulations in your state indicates that,
because your state's medical equipment exemption was broadened in 1995, some of
XXXXX's products may be exempt from sales tax. The purpose of this letter is to
request your written opinion of the taxability of the following list of
products in your state.

XXXXX
is a XXXXX manufacturer and distributor of medical devices and related
accessories. XXXXX is registered as a foreign corporation in your state. Most
of XXXXX's sales are patient sales, which must be prescribed by a health
professional. Sales of some specific products are made to clinics, doctors or
other health professionals and either used in their offices, or resold to
patients on prescription. Please note that the medical devices can be rented,
rented and converted to sale, or sold to the patients.

The
medical devices sold by XXXXX include:

XXXXX
A XXXXX device is used to treat chronic and acute pain with electrical
stimulation. A XXXXX device consists of a small, portable, battery-powered
pulse generator that is connected via wires to electrodes and placed on the
skin at or near the site of the patient's pain. A XXXXX device generally
reduces pain while the device is being used, as well as for a period of time
following usage, but does not cure the cause of the pain. XXXXX devices are
designed to be worn on the person of the user.

XXXXX
An XXXXX device is used to activate muscles for rehabilitation purposes. The
XXXXX device produces controlled, involuntary muscle contractions, aiding in
maintaining the strength and mobility of a limb or preventing deterioration of
muscle tissues in patients who are unable to perform voluntary muscle
contractions. Like XXXXX, XXXXX devices are small, portable, battery powered
pulse generators designed to be worn on the person of the user.

XXXXX
The XXXXX system provides biofeedback through auditory and visual display to
aid in muscle reeducation and rehabilitation. The clinical system would be
utilized in the office of a doctor, physical therapist, or other health
professional, while a portable device is available to the patients for use in
their home.

XXXXX
XXXXX is used by a patient for in-home treatment of XXXXX. XXXXX is composed of
an externally worn, microprocessor-based electrical neuromuscular stimulator
that activates a tampon-like vaginal electrode worn internally. XXXXX is an
electro-therapeutic device that causes involuntary contractions of the pelvic
musculature and urinary sphincter in order to treat or cure XXXXX.

XXXXX
XXXXX is a process that uses electrical current to assist drug transfer through
the skin. XXXXX applications include the delivery of local anesthesia and
anti-inflammatory medication for tissue management. The XXXXX system includes a
device transmitter and a buffered electrode. Currently, the XXXXX system is
used exclusively in the office of a health care professional, but is designed
to be worn on the person of the user.

XXXXX
The dynamic splint is used to treat range of motion problems that can occur
following injuries and certain surgeries. The splint is worn on the patient.
The health professional prescribes the splint for the patient and makes certain
modifications to the splint for specific use by the particular patient.

XXXXX
This unit, worn on the person of the user, is designed to apply upward pressure
to the patient's head by pumping the rubber bulb pump. This pressure lifts the
head, applying a stretch to the neck, which aids in relieving chronic cervical
pain and tension.

Accessories
Related accessories include electrodes, batteries, conductive gels, and skin
care products. None of the accessories may be used without the use of the
device. Except for the Innova electrode, none of the electrodes are reusable.
(i.e., skin care products are only used to help in the electrode application,
removal, or related irritation)

Questions
to be answered:

1.
Is the sale of the various products listed above subject to sales tax in your
state when sold to a patient under a written prescription?

2.
Is the rental of the various products listed above subject to sales tax in your
state when rented to patients under a written prescription?

3.
Is the sale of the various products listed above subject to sales tax in your
state when sold to a doctor or clinic, either to provide a service or to resell
to patients under prescription?

4.
Are the sale of accessories related to the various medical products listed
above taxable in your state?

Brochures
are enclosed to help you understand our products and their applications. Your
earliest reply would be greatly appreciated. Thank you, in advance, for your
assistance. Please call me at XXXXX if you have any questions.

Sincerely,

XXXXX

XXXXX

Advisory
Opinion - Sales tax exemption on medical equipment

Dear
XXXXX

We have received your request for an
opinion as to the application of the medical equipment tax exemption on
products marketed by XXXXX. Although you asked that we identify the taxable
status of each item on your list, we cannot do so. The nature of the item does not, by itself, determine its
eligibility for exemption. Instead, the
item must be

1. prescribed
   by a medical doctor,

2. as
   necessary for the treatment of a medical illness or injury or as necessary to
   mitigate and impairment resulting from illness or injury, and

3.
eligible for payment under Medicare or state Medicaid guidelines.

With regard to Medicare and Medicaid
eligibility, we are in the position of relying on outside experts to help make
that determination. In our short
experience with Medicare and Medicaid guidelines, we have learned that
eligibility often depends upon the individual circumstances of the person for
whom the equipment is prescribed.

Medical equipment and supplies
purchased by or on behalf of a health care facility, doctor, nurse or other
health care provider for use in their professional practice are ineligible for
the exemption.

I am sorry we cannot be more
specific with regard to your products, but these decisions are very
fact-specific. The best advice that we
can offer is this: if you sell or rent
your equipment directly to a Utah patient who seems to meet the qualifications
listed above, contact us for assistance in determining whether the equipment
qualifies under Medicare or Medicaid.
Alternatively, we suggest that you collect and remit sales tax on the
sale or rental and direct the patient to contact us for assistance in obtaining
a refund if one is due.

For
the Commission,

Alice
Shearer,

Commissioner