LR 8208
Medical Device Used in Blood Vessel Subject to Tax
August 25, 2022
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated July 19, 2022.
The facts as presented in your letter ruling request and subsequent email conversation are summarized as follows:
Applicant is a medical corporation that offers a wide range of products from entry site management and lesion access; devices for injection and infusion therapy; drug delivery devices, and various consulting services to enhance patient outcomes and operation efficiencies.
One of the products Applicant sells is a hydro coil system used for embolization. Generally, coil embolization is a catheter-based procedure that allows precise occlusion of abnormal blood flow in a blood vessel. A catheter with a metallic occluding coil is inserted into an artery, usually in the groin (the femoral artery). It is then advanced to the abnormal blood vessel. Once properly positioned, the metal coil is released, springing into position within the vessel. It remains firmly in place by the expansion of the metal coils. A blood clot will form on the coil, completely obstructing the abnormal blood flow beyond the coil. Eventually a scar will form, creating a permanent seal.
Applicant's coil system is intended for the endovascular embolization of intracranial aneurisms and other neurovascular abnormalities such as arteriovenous malformations and arteriovenous fistulae. It is also intended for vascular occlusion of blood vessels within the neurovascular system to permanently obstruct flow to an aneurysm or other vascular malformation and for arterial and venous embolizations in the peripheral vasculature.
ISSUE:
Are Applicant's sales of their hydro embolization coils subject to sales and use tax?
RESPONSE:
Yes. Applicant's sales of hydro embolization coils are subject to sales and use tax.
Section 144.020.1, RSMo, provides: "A tax is hereby levied and imposed [...] upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state."
Section 144.610.1, RSMo, imposes a use tax "for the privilege of storing, using or consuming within this state any article of tangible personal property[.]"
Section 144.030.2(18), RSMo, in relevant part, provides a sales tax exemption for "[a]ll sales of insulin, and all sales, rentals, repairs, and parts of durable medical equipment, prosthetic devices, and orthopedic devices as defined on January 1, 1980, by the federal Medicare program pursuant to Title XVIII of the Social Security Act of 1965, including the items specified in Section 1862(a)(12) of that act..."
Missouri Code of State Regulations 12 CSR 10-110.013(2)(D) defines a prosthetic device as "a device that replaces all or part of the function of a permanently inoperative or malfunctioning internal body organ and is medically required."
Missouri Code of State Regulations 12 CSR 10-110.013(2)(A) defines orthopedic device as "a rigid or semi-rigid leg, arm, back or neck brace and casting materials which are directly used for the purpose of supporting a weak or deformed body member or restricting or eliminating motion in a diseased part of the body."
Finally, On January 1, 1980, the federal Medicare program under 42 U.S.C. section 1395(s)(6) defined durable medical equipment to include:
[I]ron lungs, oxygen tents, hospital beds, and wheelchairs (which may include a power-operated vehicle that may be appropriately used as a wheelchair, but only where the use of such a vehicle is determined to be necessary on the basis of the individual's medical and physical condition and the vehicle meets such safety requirements as the Secretary may prescribe) used in the patient's home (including an institution used as his home)...whether furnished on a rental basis or purchased[.]
Applicant's hydro embolization coils do not qualify as a prosthetic or orthopedic device, and it is not among the items listed as durable medical equipment. The coils are used to allow precise occlusion of abnormal blood flow in a blood vessel. These coils are not a prosthetic device because they do not replace the function of a permanently inoperative or malfunctioning internal body organ. An embolization product is not an orthopedic device because it is not a rigid or semi-rigid casting material that is used to support a body member, and it does not restrict or eliminate motion in a diseased or injured part of the body.
It does not qualify as durable medical equipment because it is not among the items listed as durable medical equipment. Section 144.030.2(18), RSMo, incorporates the federal definition in effect on January 1, 1980. Therefore, applicant's sales of its hydro embolization coils do not qualify for the exemption under section 144.030.2(18), RSMo.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth should be reviewed on a regular basis. Please note that any change or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford