BEFORE THE UTAH STATE TAX COMMISSION
XXXXX, ) FINDINGS OF FACT,
Petitioner, : CONCLUSIONS OF LAW,
: AND FINAL DECISION
AUDITING DIVISION OF THE : Appeal No. 90-1659
UTAH STATE TAX COMMISSION, :
: Account No. XXXXX
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
Joe B. Pacheco G. Blaine Davis