Sales Tax Activities
Sales Tax State Activity Update - December 2006
Virginia Says, "Smile! You're on Swallowed Camera"
The Department of Taxation has issued a Ruling of the Tax Commissioner to address the taxability of pill-sized video cameras that are orally ingested by patients to assist physicians in the diagnosis of digestive system disorders.
The cameras are used to capture images and data regarding the esophagus and gastrointestinal tract. The devices are part of a diagnostic kit that includes sensors and a data recorder. The miniature camera capsules are passed naturally through the patient's body. The devices are not retrieved, and thus are used one time only.
Virginia Code ยง 58.1-609.10(10) provides, in pertinent part, an exemption for durable medical equipment and devices, and related parts and supplies specifically designed for those products. . . when such items are purchased by or on behalf of an individual for use by such individual. By definition, durable medical equipment (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) is generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home.
The cameras do not meet all four criteria to be considered durable medical equipment. The devices fail to qualify because they cannot withstand repeated use and their use is not appropriate for in the home, as the images and data must be read by a trained professional in the presence of the appropriate output devices. The video capsules do not qualify for any other exemption. Therefore, these devices are subject to Virginia sales and use tax.
The full text may be accessed on the Virginia Tax Policy Website.
(Virginia Department of Taxation, Rulings of the Tax Commissioner 06-113, 10/10/06 )
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