Information Release

This archived Information Release has been superseded by a later release. It is archived here for historical/reference purposes ONLY. For the most current Information Releases, please refer to the main "Information Releases - Current Releases" index.

ST 2003- 10 - H.B. 95 – Drugs, Prosthetic Devices, Mobility Enhancing Equipment, and Durable Medical Equipment  - July 10, 2003

Sales and Use Tax

H.B. 95 – Drugs, Prosthetic Devices, Mobility Enhancing Equipment, and Durable Medical Equipment

Am. Sub. H.B. 95 contains a number of changes intended to bring Ohio statutes into compliance with the terms of the Streamlined Sales and Use Tax Agreement. Information on the Streamlined Agreement can be found at www.streamlinedsalestax.org. Effective July 1, 2003, H.B. 95 inserted definitions for the terms "drug," "prescription," "durable medical equipment," "mobility enhancing equipment," and "prosthetic device." H.B. 95 also modified the sales tax exemptions for drugs and medical equipment found in R.C. 5739.02(B)(18) and (19).

Definitions

Definitions of the terms "drug," "prescription," "durable medical equipment," "mobility enhancing equipment," and "prosthetic device" are located in new divisions (FFF) through (JJJ) of R.C. 5739.01. These new definitions are used to define the parameters of revised exemptions to the sales tax. The new definitions provide:

(FFF) "Drug" means a compound, substance, or preparation, and any component of a compound, substance, or preparation, other than food, dietary supplements, or alcoholic beverages that is recognized in the official United States pharmacopoeia, official homeopathic pharmacopoeia of the United States, or official national formulary, and supplements to them; is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or is intended to affect the structure or any function of the body.

(GGG) "Prescription" means an order, formula, or recipe issued in any form of oral, written, electronic, or other means of transmission by a duly licensed practitioner authorized by the laws of this state to issue a prescription.

(HHH) "Durable medical equipment" means equipment, including repair and replacement parts for such equipment, that can withstand repeated use, is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of illness or injury, and is not worn in or on the body.

(III) "Mobility enhancing equipment" means equipment, including repair and replacement parts for such equipment, that is primarily and customarily used to provide or increase the ability to move from one place to another and is appropriate for use either in a home or a motor vehicle, that is not generally used by persons with normal mobility, and that does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

(JJJ) "Prosthetic device" means a replacement, corrective, or supportive device, including repair and replacement parts for the device, worn on or in the human body to artificially replace a missing portion of the body, prevent or correct physical deformity or malfunction, or support a weak or deformed portion of the body. As used in this division, "prosthetic device" does not include corrective eyeglasses, contact lenses, or dental prosthesis.

Exemptions

The current exemptions for drugs and medical equipment found in R.C. 5739.02(B)(18) and (19) were substantially revised by H.B. 95. In many cases, these amendments will broaden the exemptions provided. In some cases, however, previously exempt items may become taxable.

R.C. 5739.02(B)(18)
R.C. 5739.02(B)(18), effective July 1, 2003 provides exemption for:

Sales of drugs for a human being, dispensed pursuant to a prescription; insulin as recognized in the official United States pharmacopoeia; urine and blood testing materials when used by diabetics or persons with hypoglycemia to test for glucose or acetone; hypodermic syringes and needles when used by diabetics for insulin injections; epoetin alfa when purchased for use in the treatment of persons with medical disease; hospital beds when purchased for use by persons with medical problems for medical purposes; and medical oxygen and medical oxygen-dispensing equipment when purchased for use by persons with medical problems for medical purposes;

This new provision represents several changes from prior law. Most importantly, the exemption for drugs has been expanded. Formerly, only drugs "dispensed by a licensed pharmacist" qualified for exemption. This precluded exemption for most drugs dispensed by a physician.

As revised, R.C. 5739.02(B)(18) provides exemption for any drug dispensed pursuant to a prescription, whether or not dispensed to the patient by a pharmacist. The new language will include drugs dispensed by a physician in the course of his or her practice, such as vaccines, antibiotics, and chemotherapy drugs, whether given to the patient or injected.

The new language retains the limitation from prior law that provides the exemption only for drugs "for a human being." Drugs for animals are not exempted by this provision, but taxable to a veterinarian as a "consumer" under R.C. 5739.01(D)(2). However, other exemptions may, in some cases, apply to veterinary drugs. For example, drugs used to treat farm livestock may be exempted under the "used directly in farming" exemption.

For prescription drugs dispensed by a pharmacist, the pharmacist must maintain the prescription records required by law to establish its exempt sales. No exemption is provided for over-the-counter type drugs, such as aspirin, that are purchased without a prescription.

Prior law allowed exemption for epoetin alfa only when used in the treatment of end-stage renal disease. H.B. 95 amended the provision for epoetin alfa to allow exemption when it is used to treat a "medical disease." The specific inclusion in R.C. 5739.02(B)(18) of insulin and epoetin alfa does not create any limitation on the operation of this section to exempt drugs dispensed on the prescription of a licensed medical practitioner. The final change in R.C. 5739.02(B)(18) is the inclusion of the word "medical" before both "oxygen" and "oxygen dispensing equipment."

R.C. 5739.02(B)(19)

R.C. 5739.02(B)(19) has been significantly revamped by H.B. 95. Effective July 1, 2003, that section will provide sales tax exemption for:

Sales of prosthetic devices, durable medical equipment for home use, or mobility enhancing equipment, when made pursuant to a prescription and when such devices or equipment are for use by a human being.

There are two basic limitations on the scope of the exemption provided by this section. First the prosthetic device, durable medical equipment, or mobility enhancing equipment must be sold pursuant to a prescription, as defined in R.C. 5739.01(GGG). Vendors of these types of equipment must maintain records of the sales made to a consumer under the order of a licensed medical practitioner (prescription) to establish the claim of exemption.

Second, the device must be for use by a human being. Prosthetic devices, mobility enhancing equipment or durable medical equipment for use by or in the treatment of animals do not qualify for this exemption.

Prosthetic devices

Prosthetic devices, as defined in R.C. 5739.01(JJJ), include items:

*** worn on or in the human body to artificially replace a missing portion of the body, prevent or correct physical deformity or malfunction, or support a weak or deformed portion of the body.

Included in this exemption would be such items as artificial limbs, prosthetic eyes, breast prostheses, braces, ostomy appliances, and joint replacements. The exemption would also include items such as hairpieces for chemotherapy patients if they are prescribed by a medical practitioner. However, the statute continues to specifically exclude from the definition the following devices, "eyeglasses, contact lenses, and dental prostheses."

Durable medical equipment

Durable medical equipment as defined in R.C. 5739.01(HHH) will be exempt so long as the equipment is "for home use." Purchases of medical equipment for use in physicians’ offices, hospitals, nursing homes or treatment centers do not qualify for this exemption. Some of these entities may still be able to qualify for exemption if, for example, the entity is a charitable organization, or a state agency, or a political subdivision of the state. [Note also that "hospital beds" and "oxygen dispensing equipment" that are "for use by persons with medical problems for medical purposes" are exempt under R.C. 5739.02(B)(18). That exemption does not contain the "home use" exclusion.]

Examples of the types of durable medical equipment that would qualify for the exemption, if for home use, include bath and shower chairs, traction equipment, and dialysis equipment. Effective July 1, 2003, items that would not qualify as durable medical equipment include items that are not designed for repeated use such as disposable diapers (including adult diapers), bandages, or nasal strips.

Mobility enhancing equipment

The final area of exemption in R.C. 5739.02(B)(19) is "mobility enhancing equipment," as defined in R.C. 5739.01(III). This exemption includes such items as crutches, walkers, chairlifts, wheelchairs [whether motorized or not]. It also includes devices used to lift or transport wheelchairs in a motor vehicle, and other special devices or equipment to allow persons with a physical disability to operate a motor vehicle.

However, the exemption does not extend to any motor vehicles, or to equipment on a motor vehicle that is normally provided by a motor vehicle manufacturer. For example, a person might purchase a van, and then have the van customized to accommodate a wheelchair. In that case, the purchaser could not claim exemption on the purchase of the van, but could claim exemption on the customizing so long as it was not equipment that is normally provided by a motor vehicle dealer.

To be exempt, mobility enhancing equipment must be "appropriate for use either in a home or a motor vehicle." Thus, purchases by a retailer, of motorized shopping carts to assist persons with disabilities in shopping at the store would not qualify for exemption as mobility enhancing equipment. The equipment must also be of a type "that is not generally used by persons with normal mobility." Thus a bicycle would not qualify for the exemption.

Any vendor of mobility enhancing equipment must maintain a record of the order of a licensed medical practitioner to establish the exempt nature of the sale.

If you have questions regarding any matter covered in this release, please call 1-888-405-4039 (Ohio Relay Service for the Speech or Hearing Impaired: 1-800-750-0750).