BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX, ) FINDINGS OF FACT,
Petitioner, : CONCLUSIONS OF LAW,
: AND FINAL
DECISION
:
v. :
AUDITING
DIVISION OF THE : Appeal No. 90-1659
UTAH STATE TAX COMMISSION, :
: Account
No. XXXXX
Respondent. :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission pursuant to the Petitioner's
Petition for Redetermination dated XXXXX.
At the request of counsel for the parties, formal hearing in this matter
was waived and the determination of the Tax Commission is based upon the facts
as stipulated to by the parties and the arguments contained in their respective
briefs.
Based
upon the foregoing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1.
The tax in question is sales tax.
2.
The audit period in question is XXXXX through XXXXX.
3.
The Petitioner rented and sold, pursuant to a medical prescriptions, a device
known as an "XXXXX" to individuals in need of such a device. No sales tax was collected on the rentals or
sales of that device.
4.
The XXXXX is described in its sales brochure as an "engineered device that
draws XXXXX from the surrounding XXXXX, concentrates and delivers it to the
patient at a prescribed rate." The
device takes the place of XXXXX for those individuals who are medically in need
of supplemental XXXXX.
CONCLUSIONS OF LAW
The
sale of medicine is exempt from sales and use tax. (Utah Code Ann. §59-12-104(10).)
"Medicine"
means any oxygen or stoma supplies prescribed by a physician or administered
under the direction of a physician or paramedic. (Utah Code Ann. §59-12-102(4)(a)(iii).)
Prescribed
medicines, including stoma supplies, oxygen, insulin, and syringes are
specifically exempted even though sold to the final consumer. (Utah State Tax Commission Administrative
RuleR865-19S-37(lC)(12).)
DECISION AND ORDER
The
issue before the Commission is whether or not the sales and rentals of the
XXXXX were exempt from sales tax as sales of oxygen as contemplated under Utah
Code Ann. §59-12-104 and §59-12-102.
The
Petitioner argues that the word "supplies" modifies both "oxygen
and stoma". Therefore
"provision" (iii) can just as accurately be read as defining medicine
as oxygen supplies prescribed by a physician versus oxygen and stoma
supplies" (Petitioner's Trial Brief at page 4.)
The
Respondent argues that a more restrictive interpretation of that statutory
language is appropriate and that the word "supplies" does not modify
the word oxygen but applies only to stoma supplies. In support of its argument, the Respondent submitted a transcript
of the floor debate held at the Utah State Senate which discussed Senate Bill
53 which provided the sales tax exemption for oxygen.
A
fair reading of the discussion that took place in the legislature regarding the
oxygen exemption provision indicates that the legislative intent of the bill
was to exempt oxygen and, as a separate consideration, an exemption for stoma
supplies was also considered. There was
nothing in the transcript of the floor debate which would support a conclusion
that the legislature intended to exempt oxygen supplies and stoma supplies.
This
finding is consistent with Administrative RuleR865-19S-37(lC)(12) which
specifically exempts "prescribed medicines, including stoma supplies,
oxygen, insulin, and syringes."
Clearly, under this rule, stoma supplies and oxygen are separate items
of tangible personal property which are exempt from sales tax and that the word
"supplies" does not apply to both items.
Under
this interpretation of the definition of "medicine" it is clear that
the device which the Petitioner rents or sells is not oxygen, but rather, is a
mechanical device which operates to take existing surrounding XXXXX,
concentrate it and deliver it at that concentrated level. Thus, when one rents or purchases such a
device, one does not rent or purchase oxygen as an item of tangible personal
property or medicine but rather one is renting or purchasing a mechanical
device that subsequently provides the XXXXX needed.
The
Petitioner argues that to draw such a fine distinction between purchasing
oxygen in its gaseous state or purchasing a device which manufactures oxygen is
nonsensical. Although it may be true
that ultimately, both items deliver oxygen to those who are medically dependent
upon supplemental oxygen, the above described distinction can and has been made
by the legislature and the Commission is bound by the legislature's
determinations.
Based
upon the foregoing, the Tax Commission finds that the sale or rental of the
"XXXXX" constitutes a sale or rental of tangible personal property
that is not exempt as a sale of medicine.
Therefore, the determination of the Auditing Division is affirmed. It is so ordered.
DATED
this 20 day of August, 1992.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner