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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.
"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.
"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.
"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.
"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.
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