ST 2010-03 - Sales and Use Tax: Drugs, Durable Medical
Equipment, Mobility Enhancing Equipment, and Prosthetic
Devices – Issued September 2010
This information release supersedes a release of the same
title from July 2003.
As part of its participation in the Streamlined Sales Tax
effort, Ohio has adopted the uniform definitions approved by
the Streamlined Sales Tax Governing Board dealing with drugs
and various types of medical equipment. These
definitions are set out below.
Ohio Revised Code (R.C.) section 5739.01(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.
R.C. 5739.01(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.
R.C. 5739.01(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. "Durable medical equipment" does not include mobility
enhancing equipment.
R.C. 5739.01(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. "Mobility
enhancing equipment" does not include durable medical
equipment.
R.C. 5739.01(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.
The attached chart and
addendum (in PDF format), which is not an all
inclusive list of all products within each defined term, is
the placement of the listed products, either as within the
healthcare terms defined above or as not included in those
definitions. Where a product is not included in the
attached list, the Department of Taxation will use the list
as guidance application of the above definitions to any such
product.
There are exemptions for these various types of medical items
found in R.C. 5739.02(B)(18) and (19). These sections provide
exemption for:
(18) Sales of drugs for a human being that may be dispensed
only 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 by
hospitals, nursing homes, or other medical facilities; and
medical oxygen and medical oxygen-dispensing equipment when
purchased by hospitals, nursing homes, or other medical
facilities;
(19) 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.
5739.02(B)(18) -
Drugs
“(D)rugs for a human being that may be dispensed only
pursuant to a prescription” are entitled to exemption from
Ohio sales or use tax. This exemption is not limited to
sales to an end consumer. Thus, purchases by a
physician or medical facility of drugs that can be dispensed
or administered to patients on the order or a licensed
practitioner are entitled to exemption. However,
over-the-counter medications that can be obtained without an
order from a licensed practitioner are not entitled to
exemption.
For purposes of R.C. 5739.01(GGG), a “prescription” is any
order, whether in written, oral, electronic or other form,
that is “issued *** by a duly licensed practitioner
authorized by the laws of this state to issue a
prescription.” R.C. 4721.01(I), which is a portion of
the chapter of the Revised Code dealing with pharmacists,
identifies those persons authorized by law to issue
prescriptions:
(I) "Licensed health professional authorized to prescribe
drugs" or "prescriber" means an individual who is authorized
by law to prescribe drugs or dangerous drugs or drug therapy
related devices in the course of the individual's
professional practice, including only the following:
(1) A dentist licensed under Chapter 4715. of the Revised
Code;
(2) A clinical nurse specialist, certified nurse-midwife, or
certified nurse practitioner who holds a certificate to
prescribe issued under section 4723.48 of the Revised
Code;
(3) An optometrist licensed under Chapter 4725. of the
Revised Code to practice optometry under a therapeutic
pharmaceutical agents certificate;
(4) A physician authorized under Chapter 4731. of the Revised
Code to practice medicine and surgery, osteopathic medicine
and surgery, or podiatry;
(5) A physician assistant who holds a certificate to
prescribe issued under Chapter 4730. of the Revised
Code;
(6) A veterinarian licensed under Chapter 4741. of the
Revised Code.
Note, of course, that a veterinarian cannot prescribe
medications for a human being.
Example 1 – A pharmacist receives a call from a physician’s
office ordering a medication for a patient. The
medication is one that cannot be dispensed by the pharmacist
without a prescription. The pharmacist fills the order
and dispenses the medication to the patient. The sale to the
patient is exempt from Ohio sales or use tax.
Example 2 – A doctor prescribes an over-the-counter
medication for a patient and writes the name of the
medication on a prescription pad. The patient goes to a
local pharmacy to obtain the medication. The patient
finds the medication and purchases it. This transaction
is taxable since the medication in question is not one that
can only be dispensed pursuant to a prescription.
Example 3 – A dentist orders a case of an anesthetic which
the dentist will administer to patients when performing
certain procedures. The anesthetic is a
medication that cannot be dispensed or administered except by
a licensed practitioner. The dentist’s purchase of the
anesthetic is exempt.
Example 4 – A pharmacist fills a prescription issued by a
veterinarian for a medication for a customer’s pet cat.
Since the drug is not for a human being, the sale is subject
to Ohio tax.
Example 5 – A pharmacist fills a prescription issued by a
veterinarian for a medication to be given to a customer’s
farm animals. While this transaction is not exempt from
Ohio tax under R.C. 5739.02(B)(18), it may be that the
customer has an exemption based on the use of the medication
in producing tangible personal property for sale by farming
under R.C. 5739.02(B)(42)(a).
R.C. 5739.02(B)(18)
– Other exemptions
R.C. 5739.02(B)(18) provides exemption for:
Sales of *** 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 (.)
The exemptions for these items are self-explanatory.
The same section provides exemption for:
Sales of *** hospital beds when purchased by hospitals,
nursing homes, or other medical facilities; and medical
oxygen and medical oxygen-dispensing equipment when purchased
by hospitals, nursing homes, or other medical facilities (.)
Generally, hospital beds and medical oxygen dispensing
equipment purchased by individuals would be durable medical
equipment for home use addressed under R.C.
5739.02(B)(19). An individual’s purchase pursuant to a
prescription of medical oxygen would be exempt as the
purchase of a drug that can only be sold on a
prescription. This section grants exemption for
purchases of these items by hospitals, nursing homes and
other medical facilities.
R.C. 5739.02(B)(19)
– Durable Medical Equipment
The exemption for durable medical equipment, as defined in
R.C. 5739.01(HHH), has three preconditions. First, the
durable medical equipment must be for home use. While
the term “home use” is not defined, the use of the term in
the statute clearly indicates that sales of durable medical
equipment to a hospital, physician’s office, nursing home or
other medical facility for use in providing medical services
does not qualify for exemption under this provision. Of
course, some hospitals or medical facilities may qualify for
exemption under another provision of the Revised Code.
For example, a charitable hospital could claim exemption
under the provisions of R.C. 5739.02(B)(12).
The second limitation is that the durable medical equipment
must be sold pursuant to a prescription in order to be
exempt. As noted above, a prescription may be issued by
any form of transmission (e.g., oral, written,
electronic). A vendor or seller of durable medical
equipment must retain evidence of a prescription in any
transaction where tax is not collected. The evidence
may be any record of the prescription and could include a
copy of a written prescription, or contemporaneous notes
taken of an oral prescription provided by a medical
practitioner. In cases where the seller receives
payment for durable medical equipment from a private or
governmental insurance company, the Department will consider
evidence of the insurance payment as sufficient proof that
the sale was made pursuant to a prescription.
The third limitation is that the durable medical equipment be
for a human being. No exemption will be allowed under
R.C. 5739.02(B)(19) for sales of durable medical equipment
used in the care or treatment of animals, even if prescribed
for the animal. However, as noted above, it is possible
that some consumers could have a claim of exemption based on
another statutory provision. For example, a consumer
might claim the exemption in R.C. 5739.02(B)(42)(a) for items
used in producing a tangible personal property for sale by
farming.
R.C. 5739.02(B)(19)
- Mobility Enhancing Equipment
Like durable medical equipment, mobility enhancing equipment
is exempt under R.C. 5739.02(B)(19) when it is sold pursuant
to a prescription and for use by a human being. While
mobility enhancing equipment could frequently fit the
definition of durable medical equipment, R.C. 5739.01(HHH)
and (III) specifically provide that the two terms are
mutually exclusive. Thus if an item qualifies as
mobility enhancing equipment, it is not considered to be
durable medical equipment.
To constitute mobility enhancing equipment, the equipment
must be “appropriate for use either in a home or a motor
vehicle.” Items designed for commercial or
institutional use may not qualify for exemption under R.C.
5739.02(B)(19).
The exemption for mobility enhancing equipment does not
include items that are incorporated into real property.
Thus, R.C. 5739.02(B)(19) does not provide exemption for
materials used to build permanent wheelchair ramps or to
railings or bars that become incorporated into a home and
lost their status as tangible personal property.
Many items that are used to modify a motor vehicle for use by
persons with physical impairments are mobility enhancing
equipment. However, mobility enhancing equipment does
not include a motor vehicle itself or any equipment normally
provided by a motor vehicle manufacturer. Essentially,
the exemption applies to customizations of motor vehicles in
order to accommodate the needs of the impaired
individual.
Example – A wheelchair-bound individual purchases a motor
vehicle from a motor vehicle dealer. The purchaser has
the vehicle taken to another vendor that installs a
wheelchair lift and makes other modifications to the vehicle
so that it is usable by the purchaser. The purchaser
has a prescription from a physician for the vehicle
modifications. The sale of the vehicle from the dealer
is taxable. The sale and installation of the
modifications is exempt under R.C. 5739.02(B)(19).
R.C. 5739.02(B)(19)
– Prosthetic Devices
The exemption provided by R.C. 5739.02(B)(19) for prosthetic
devices contains two basic limitations. The first is
that the items must be sold pursuant to a prescription and
the second is that the items must be for use by a human
being.
A prosthetic device need not be a permanent replacement or
supportive device. For example, a catheter to support
the process of urination during a patient’s hospital stay
would be a prosthetic device. Another example would be
a sling to immobilize a patient’s arm during the recovery
from a shoulder injury.
A purchase of a prosthetic device by a physician, or by a
hospital or medical facility on the order of a physician for
the treatment of a designated patient is exempt as being
purchased pursuant to a prescription. Purchases by a
hospital or medical facility of items to be maintained in an
inventory are not made pursuant to a prescription, even
though the items may otherwise qualify as prosthetic
devices. However, if such prosthetic devices are
ordered for a patient by his or her physician and separately
itemized and billed to patient or an insurance carrier, this
would constitute a sale of the prosthetic device pursuant to
a prescription. The hospital or medical facility would
be able to purchase such items exempt as items for resale.
Application of
Other Exemptions
In any case where an exemption for durable medical equipment,
mobility enhancing equipment, or a prosthetic device is
claimed for a statutory reason other than the exemption
provided by R.C. 5739.02(B)(19), the vendor or seller must
obtain a fully completed exemption certificate from the
consumer. Failure to obtain such a certificate could
subject the vendor or seller to liability on audit for
uncollected taxes.
If you have any questions regarding this matter, you should
direct your questions to one of our taxpayer service centers
or call 1-888-405-4039.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750