When were a dental supplier's sales of durable medical equipment exempt as patient-specific purchases?

Plain-English summary

Virginia removed audited dental-equipment sales only where the supplier documented that the item was purchased for a specific patient. The out-of-state seller had been assessed on untaxed sales lacking valid exemption certificates and on durable medical equipment without patient-specific support.

Virginia's exemption covered qualifying prosthetic devices and durable medical equipment purchased by or on behalf of an individual for that person's use. The dental regulation made bulk purchases taxable even when an item was later withdrawn, modified, and dispensed to a patient.

After reviewing the additional records, the Department directed audit staff to remove items for which the seller proved the required patient connection. The remaining adjusted balance and interest would still be billed.

What this means for you

• Tie each exempt dental prosthetic or durable-medical-equipment sale to a specific patient.
• Keep the prescription, order, invoice, or other record that proves the patient connection.
• Buying dental items in bulk for later assignment does not satisfy the exemption described here.
• Audit relief follows the documented transactions, not a general claim about the product category.

Common questions

Q: Were all dental equipment sales exempt?
A: No. Only items documented as purchased on behalf of a specific individual were removed.

Q: What happened to items bought in bulk?
A: They remained taxable under the cited dental regulation, even if later modified for a patient.

Q: Was the whole assessment canceled?
A: No. The audit was adjusted, and an updated bill would reflect the remaining balance and interest.

Citations and references

• Va. Code § 58.1-609.10 10.
• 23 VAC 10-210-500.

Subject

Durable medical equipment lacking exemption documentation.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-77

Original ruling text

May 29, 2013

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This will reply to your letter submitted on behalf of * (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued for the period May 2008 through April 2011. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer is located outside Virginia and sells dental equipment, supplies and implants. As a result of the Department's audit, an assessment was issued for untaxed sales not supported by valid certificates of exemption and sales of durable medical equipment lacking documentation to support the exemption in Va. Code § 58.1-609.10 10.

The Taxpayer asserts that the contested sales of durable medical equipment to dentists are for specific patients and are exempt under Va. Code § 58.1-609.10 10. The Taxpayer provides additional documentation in support of its claim and requests that the Department adjust the audit accordingly.

DETERMINATION

Virginia Code § 58.1-609.10 10 provides, in part, an exemption from the retail sales and use tax for "prosthetic devices, orthopedic appliances, catheters...[and] other durable medical equipment and devices, and related parts and supplies specifically designed for those products ...when such items or parts are purchased by or on behalf of an individual for use by such individual."

Title 23 of the Virginia Administrative Code 10-210-500 discusses the sales and use tax application to dentists, dental laboratories and dental supply houses. The regulation addresses purchases on behalf of an individual and provides that:

The tax applies to sales to a dentist by a dental laboratory or supplier of dentures, plates, braces and similar prosthetic devices, or the component parts thereof, unless such dentures, braces, etc. are purchased on behalf of a specific patient. If such items are purchased in bulk and then dispensed to a particular patient, the original purchase will be subject to the tax even if the items withdrawn from the bulk inventory are modified for a specific patient.

Based on a review of the documentation submitted to the Department, the audit will be adjusted to remove those items in which the Taxpayer provides documentation that the medical equipment was purchased on behalf of a specific individual.

CONCLUSION

The audit will be adjusted based on this determination. After the audit is revised and the assessment is adjusted by the Department's audit staff, an updated bill with accrued interest will be issued to the Taxpayer. The outstanding balance must be paid within 30 days from the date of the bill to avoid the accrual of additional interest. Please remit payment to: Virginia Department of Taxation, Attention: *, 600 E. Main Street,

23rd Floor, Richmond, Virginia, 23219. If you have any questions concerning payment of the assessment, you may contact * at ***.

The Code of Virginia section and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions about this determination, you may contact * in the

Office of Tax Policy, Appeals and Rulings at *.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5160439318.T