…
Taxpayer maintains that its purchase of topical substances –
such as protective lotions, ointments, moisturizing cream – are nonlegend drugs
and fall within the exemption set out in IC § 6-2.5-5-19 (2003). Taxpayer is
correct. The lotions and ointments fall within the definition of
"drugs" under IC § 6-2.5-5-17(3) because they cure, mitigate or treat
disease or "affect the structure or any function of the body," are
prescribed pursuant to IC § 16-42-19-3, and "the ultimate user of the drug
is a person confined to a hospital or health care facility." IC §
6-2.5-5-19(d)(2) (2003). However, it should be noted that the exemption does
not cover the use of nonlegend drugs outside of Taxpayer's facility. To the
extent that Taxpayer can differentiate between the use of the nonlegend drugs
inside its facility and outside its facility – providing "home health
care" – Taxpayer's protest is sustained.
…
The audit found that Taxpayer purchased IV supplies,
syringes, catheters, and tubing without paying sales tax. The audit assessed
tax concluding that, "Supplies, equipment, and devices used or consumed by
a practitioner in rendering medical treatment do not qualify for exemption from
sales tax...."
…
45 IAC
2.2-5-27(b) plainly states that, in order to qualify for the exemption, the
use of the medical equipment supplies and devices is necessary to the purchaser
in order to correct or to alleviate a condition brought about by injury to,
malfunction of, or removal of a portion of the purchaser's body. In this case,
the purchaser is Taxpayer. Taxpayer is an extended care facility and has no
body upon which medical equipment, supplies, or devices may be used. Rather,
Taxpayer purchases the equipment and uses it in providing medical services to
its patients. Taxpayer has failed to meet its burden under IC § 6-8.1-5-1(c) of
demonstrating that the proposed assessment was wrong.
