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Sales Tax State Activity Update - March 2005

West Virginia Revisits Taxability of Prescribed Medical Equipment

The West Virginia Office of Tax Appeals reduced an audit assessment by ruling that a taxpayer's purchases of mobility enhancing devices pursuant to prescriptions obtained by their customers were exempt from use tax. The taxpayer is a contractor that sells and installs equipment such as small elevators, porch lifts, and stair lifts within homes and other locations to assist persons with limited mobility.

As a result of an audit by the State Tax Commissioner, the taxpayer was assessed tax on equipment purchases that were used and consumed in the business of providing contracting services to its customers. However, the taxpayer asserted that its purchases of medical related equipment that were made pursuant to prescriptions should have been exempt according to West Virginia Code § 11-15-9(a)(11). Here, an exemption is provided for sales of drugs dispensed upon prescription and drugs are defined elsewhere to include medical appliances.

(Note that this is the pre-2004 version of the exemption, as the audit period under question ended July 31, 2003. The post-2004 version of the exemption uses different language, including the term "mobility enhancing equipment", but the taxability remains the same.)

The Office of Tax Appeals stressed that the Legislature did not intend for the law to exempt sales of prescribed drugs and appliances to persons other than the individual for whom the prescription was written. However, the Virginia Supreme Court had a different opinion in a 2001 ruling that prescribed items are exempt even when not sold directly to the person holding the prescription. Due to the similar facts and circumstances of both cases, the Office of Tax Appeals was bound by The Supreme Court decision, and was forced to allow the exemption to the taxpayer for their purchases of mobility enhancing devices pursuant to prescriptions.

(No. 04-082 U, West Virginia Office of Tax Appeals, January 7, 2005)

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