REQUEST LETTER

01-006

Response: 5/1/01

Re: NAME

Medical Exemptions, Sales Tax

Advisory Opinion

Attention: TP REP,

We have communicated to TP REPRESENTATIAVE at the Tax Commission on behalf of our client, BUSINESS suggested we write and ask you for an advisory opinion on exempt sales tax status prosthetics.

BUSINESS fits and distributes eye prosthetics to clients who have prescriptions from medical doctors. He also contracts with insurance companies regarding the same. It is cited in Tax Code 59-12-104 “that medicine does not include any auditory, prosthetic, ophthalmic, or ocular device or appliance” with the exception of the following:

Following Title 19 of the Federal Social Security Laws, if that excludes this through Medicare/Medicaid then the State of Utah would follow suit and sales tax would be exempt, is that correct?

If referred by a physician’s prescription, would they be exempt?

They often contract with insurance companies to fit patients as well, would this be tax exempt?

Please list any other exemptions or non-exemptions regarding this matter so that we can more clearly advise out client. If you have further questions or need clarification, please do not hesitate to contact our office.

Regards,

NAME

BUSINESS

RESPONSE LETTER

May 1, 2001

BUSINESS

ADDRESS

RE: Advisory Opinion – Application of Sales Tax on Eye Prosthetics

Dear NAME,

We have received your request for an advisory opinion concerning the taxability of eye prosthetics, which we understand to be artificial replacements for human eyes. We shall discuss two separate sales tax exemptions to determine whether the prosthetics may be purchased tax-free.

I. Exemption on Sales of Medicine

For purposes of the exemption on sales of medicine, Utah Code Ann. §59-12-102(16) provides a definition for the term “medicine.” Not only does the definition describe which items are considered “medicine,” but it also lists specific items that are not. Subsection 102(16)(b)(i) specifically provides that "medicine" does not include any prosthetic device or appliance. Accordingly, an eye prosthetic would not qualify for the exemption on sales of medicine.

II. Exemption on Sales of Home Medical Equipment and Supplies

For purposes of the exemption on sales and rentals of home medical equipment and supplies, Section 59-12-102(12) provides the following definition:

(a) "Home medical equipment and supplies" means equipment and supplies that:

(i) a licensed physician prescribes or authorizes in writing as necessary for the treatment of a medical illness or injury or as necessary to mitigate an impairment resulting from illness or injury;

(ii) are used exclusively by the person for whom they are prescribed to serve a medical purpose; and

(iii) are listed as eligible for payment under Title 18 of the federal Social Security Act or under the state plan for medical assistance under Title 19 of the federal Social Security Act.

(b) "Home medical equipment and supplies" does not include:

(i) equipment and supplies purchased by, for, or on behalf of any health care facility, as defined in Subsection (12)(c), doctor, nurse, or other health care provider for use in their professional practice;

(ii) eyeglasses, contact lenses, or equipment to correct impaired vision; or

(iii) hearing aids or hearing aid accessories.

Subsection 102(12)(b)(ii) provides that items that correct impaired vision are not exempt as home medical equipment and supplies. An eye prosthetic is not designed to correct impaired vision, but rather artificially replaces an eye. As such, it is not automatically excluded from the exemption.

Accordingly, we must apply Subsection 102(12)(a) to determine if the sale of an eye prosthetic is exempt. That subsection lists three criteria that must be met before the eye prosthetic can qualify for the exemption. You indicate that a physician prescribes the eye prosthetic, which meets the first requirement. We also assume that the eye prosthetic is used exclusively by the person to whom it is prescribed, which would satisfy the second requirement. Lastly, an eye prosthetic is eligible for payment under Medicaid, as provided for under Title 19 of the federal Social Security Act and administered by the Utah Division of Health Care Financing, thereby satisfying the third requirement. As all three criteria are satisfied, the purchase of an eye prosthetic under these circumstances qualifies for the home medical equipment and supplies exemption from sales tax.

However, should a medical provider retain ownership of the eye prosthetic that is prescribed to the patient, the purchase of the prosthetic would not qualify for sales tax exemption for home medical equipment and supplies. Under this circumstance, we would consider the medical provider to use or consume the eye prosthetic in its medical practice, which, under Subsection 102(12)(b)(i) disqualifies an item from the exemption.

Please contact us if you have any other questions.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

01-006