Sales Tax State Activity Update - September 2004

Florida Clears Up Taxability of Vision Therapy Devices

The Florida Department of Revenue has issued a Technical Assistance Advisement (TAA) to discuss the taxability issues surrounding a medical technology known as Vision Restoration Therapy (VRT). VRT is a non-surgical, non-medicated, in-home therapy treatment designed to restore vision levels in patients who typically have had strokes or traumatic brain injuries.

The devices consist of a dedicated computer processor and display, proprietary software, and a headrest framework. A patient views images on the computer monitor that stimulate and activate neural pathways promoting vision restoration. While the therapy today must be delivered via an IBM computer, future possibilities include PDA devices, goggles, or some other technology.

The therapy can only be dispensed or ordered by licensed professionals. The patient is referred by his physician to an external clinic that is qualified to administer this technology. The clinic is then charged a one-time set-up fee by the VRT vendor, which includes the device, diagnostic software, and training. A yearly software license fee is also charged to the clinic, as well as a flat per patient fee. The therapy devices are not sold or leased to the patients, but instead are furnished to patients by the clinic during the treatment period and must be returned for use by other patients when treatment is completed. Patients pay a general therapy fee to the clinic, which includes the use of the devices, along with other treatment services.

The taxability status of the following property and services will be discussed:

The hardware and software that make up the medical therapy devices The fees charged to the clinics for set-up and software licenses The therapy fees charged to the patient

Section 212.08(2)(a), F.S. provides an exemption for any medical products and supplies or medicine dispensed according to an individual prescription. If the VRT vendor or the clinics were to sell or lease the therapy devices directly to patients pursuant to a prescription, this transaction would be exempt from tax. However, because the VRT vendor or the clinics do not sell or lease the devices to patients, the vendor is liable for use tax on its purchases of the devices.

According to Rule 12A-1.020(6)(b), F.A.C., the sale of medical products and supplies to medical practitioners are taxable even though the property may be used in connection with medical treatment. Thus, therapy devices sold to the clinics, including the services that are part of the sale such as the onsite training, are subject to tax. The annual software license fee is also taxable, as the software is not custom software. Note, however, that if the clinic qualifies as an exempt 501(c)(3) organization, the VRT vendor can accept an exemption certificate in lieu of collecting the tax on these sales.

Per Rule 12A-1.002(2) F.A.C., the patient fee charge is exempt as a professional service, regardless of whether the fee is charged by the clinic or by the VRT vendor.

In summary: There is no exemption for devices that deliver the medical technology known as Vision Restoration Therapy , unless the devices are sold directly to patients pursuant to a prescription or sold to exempt organizations.

http://taxlaw.state.fl.us/sut_search_taa00.asp

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