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Sales Tax State Activity Update - March 2005

Illinois and Virginia Discuss Automated External Defibrillator Services

Illinois

In a General Information Letter the Illinois Department of Revenue clarified that if there was no personal property transferred to a customer in a specific transaction the Retailers' Occupation Tax or Use Tax would not apply. The Service Occupation and Use tax is also not applicable.

Facts

The taxpayer provided a service package that included training on the use of Automated External Defibrillators (AED), that they also manufactured, and sold at wholesale and retail.

The package was termed a Wrap Around Solution â€" Services are offered in multi-year terms. In part, the services included the following:

• Basic Medical Direction which included a prescription for the AED, ongoing medical oversight, protocols for AED use, and a clinical help-line available Monday to Friday 9 AM to 5PM.
• Training on the use of the AED including CPR.
• Automatic Supply Replenishment of electrodes/batteries upon use of the AED.
• Online Program Management which tracks the details of the AED, including trained responders and their training expiration dates, location of devices, and expiration date of supplies.
• State registration services including fee payment, if necessary.
• Post-event download support, which provides a technician to go to the site and download the event data from the AED.
• Post-event rescuer support, which provides a counselor to go to the company to help people cope with a potentially stressful event.
• A 24/7 clinical help line, which expands the M-F 9-5 line.

All of the components above, with the exception of training, are generally provided on a constant basis. Training is provided at specific times during the service, and is not continuous.

Conclusion

The Department ruled that pursuant to 86 ILL Administrative Code 130.101 the Retailers' Occupation Tax is imposed upon persons selling tangible personal property. Pursuant to 86 ILL Administrative Code 150.101 the use tax is imposed upon the privilege of using tangible personal property purchased from a retailer. Likewise, pursuant to 86 ILL Administrative Codes 140.101 and 160.101 respectively, the Service Occupation Tax and the Service Use Tax are imposed on the transfer of tangible personal property incident to the sale of a service.

Although this letter did not address the taxability of each service listed it did make it clear that if no property was transferred a liability was not incurred.

The full text can be viewed here.

(General Information Letter ST 04-0243-GIL, Illinois Department of Revenue, December 15, 2004)

Virginia

The Virginia Tax Commissioner ruled that a manufacturer of automated external defibrillators (AED) who also offered services was not required to collect tax on the services.

The taxpayer offers "Solutions", which consists of basic medical direction, training, automatic supply replenishment, online program management, state registration, post-event download services, post-event rescuer support, and an AED clinical help line. The Taxpayer may bill the Solutions separately or may bundle them together on one invoice.

The Code of Virginia § 58.1-609.10 provides an exemption for prosthetic devices. The Commissioner concluded the AED was similar in function to a cardiac pacemaker, and qualified for the exemption. Therefore, the Solutions sold in connection with the sale of AED's are also exempt, and it does not matter if they are bundled or stated separately on an invoice.

You can view the ruling here.

(Ruling of the Tax Commissioner, PD 05-4, Virginia Department of Taxation, 02/01/05)

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