Taxpayer is an Indiana for-profit healthcare facility. The Indiana Department of Revenue ("Department") conducted an audit review of Taxpayer's business records, invoices, purchase orders, and sales tax returns.
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The Department's audit concluded that Taxpayer owed additional sales/use tax. Taxpayer argues that certain of the transactions addressed during the audit were exempt from sales/use tax because the transactions represented the purchase of "Medical Equipment and Devices not subject to sales and use tax in Indiana . . . ."
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Taxpayer seeks an exemption for the purchase of numerous items of medical supplies and equipment. For example, Taxpayer argues the purchase of an "Info V.A.C. Therapy" which Taxpayer states, "provides a vacuum to drain wounds and promote faster healing," is exempt. Similarly, Taxpayer argues that its purchases of "hospital-grade air mattresses," bandages, urethral kits, surgical tape, wound dressings, orthopedic stockings, irrigation solutions, aerosol masks, oxygen masks, disposable catheters, and disposable syringes, are exempt from sales tax on the ground that the items are prescribed to one of its patients.
The Department is unable to agree that Taxpayer's purchase of these supplies and equipment are exempt from sales tax pursuant to IC § 6-2.5-5-18. A sale to a purchaser – such as Taxpayer – which subsequently uses the property in providing medical services is not a sale to that purchaser pursuant to a prescription; thus, the exemptions under IC § 6-2.5-5-18(a) and (b) are wholly inapplicable. As stated in 45 IAC 2.2-5-36 , Indiana's gross retail tax "shall apply" to the purchase of "[s]urgical instruments, equipment and supplies" along with "[b]andages, splints, and all other medical supplies consumed in professional use" and "any other apparatus used in the practice of surgery or medicine." See also Sales Tax Information Bulletin 48 (August 2008). The items Taxpayer claims are exempt are medical supplies consumed in providing its medical services and are not exempt.
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Taxpayer maintains that certain of its purchases are exempt from sales tax. To a limited extent, Taxpayer is correct because it purchases non-legend drugs dispensed upon an original prescription or drug order and which are administered to patients confined to its facility. For example, Taxpayer purchased saline solution administered intravenously. The Department agrees that its purchases of saline solution qualify as a "non-legend" drug exempt pursuant to IC § 6-2.5-5-19(d) because the saline solution is a drug under IC § 6-2.5-1-17 and because the solution is administered to a "person confined to a hospital or health care facility."
Accordingly, to the extent that the following transactions contain purchases of non-legend saline solution dispensed upon an original prescription or drug order and administered intravenously to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 635185537; 636790724.
To the extent that the following transactions contain purchases of non-legend "Sodium C[h]loride" solution dispensed upon an original prescription or drug order and administered intravenously to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 636058706; 636301506; 636529354; 636790724; 637560744; 637826904; 637961489; 638673433; 638895461; 640094854; 640775186; 641711852; 642049966; 642189359; 643328627; 643555664; 643555684; 644258969; 644833602; 644972976; 645212275; 645699142; 646023185; 646778866; 647109524; 647244112.
To the extent that the following transactions contain purchases of non-legend "Protective Aloe Ointment" dispensed upon an original prescription or drug order and administered to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 643192372; 644121569.
To the extent that the following transactions contain purchases of non-legend "Neosporin" dispensed upon an original prescription or drug order and administered to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 643555664; 645699142.
To the extent that the following transactions contain purchases of non-legend "Dextrose" solution dispensed upon an original prescription or drug order and administered intravenously to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 643770566.
To the extent that the following transactions contain purchases of non-legend "9 percent sodium" administered dispensed upon an original prescription or drug order and intravenously administered to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 643555664; 645699142.
To the extent that the following transactions contain purchases of non-legend "Hydrogen peroxide" dispensed upon an original prescription or drug order and administered to patients confined to its facility, the following transactions are not subject to tax and should be removed from the audit. 644027021; 645699142; 637305057. In all other respects, Taxpayer's protest is denied.
