Kits and Accessories Exempt from Tax in Florida

Thursday, August 30th, 2012


The Florida Department of Revenue (DOR) recently issued a Technical Assistance Advisement explaining that sales of products used in healing surgical wounds are exempt as medicines or medical products dispensed to a patient pursuant to a doctor's prescription. Fla. Technical Assistance Advisement No. 12A-017 (Dept. of Revenue Aug. 1, 2012). The taxpayer that requested the ruling is a biomedical device manufacturer that questioned whether sales of two of the products it sells are subject to tax in Florida.

The first product the device manufacturer inquired about is a surgical sealant. It is a sterile chemical compound that is sprayed on a patient's lungs during surgery. It seals any air leaks created by the insertion of sutures or staples during the removal of a lung tumor and subsequent repair of the lung. The sealant dissolves within the body over 30 days to promote natural healing and reduces the amount of time the patient needs to spend in the hospital recovering from surgery. The device manufacturer typically sells this product as a single use kit to surgeons, licensed practitioners, hospitals, and clinics. The kit includes the chemical sealant, application tools, and a set of application instructions. A prescription is required to purchase the kit.

The second product the device manufacturer inquired about is an applicator spray tip. The applicator spray tips provide an additional delivery option when used with the materials included in the kit; they are designed specifically for thoracic surgeons to use during an open thoracotomy. The device manufacturer sells the applicator spray tips separately from the kit described above. Like the kit, the applicator spray tips are for single use and only sold upon the order of a licensed physician or properly licensed practitioner.

In Florida, medicines dispensed or administered directly to a patient by a licensed practitioner are exempt from tax. Fla. Stat. Ann. sec. 212.08(2)(a). Additionally, medical trays, surgical or procedure kits containing medical products, supplies, or devices that are only to be dispensed to patients upon a prescription from a licensed practitioner and intended to be single use only are exempt from tax, even if the kit or tray contains one or more items that may be subject to tax when sold separately. Fla. Admin. Code Ann. r. 12A-1.020(6)(c)(2).

Based on the facts presented by the device manufacturer, the DOR agreed that the sale of these products is exempt from tax. The surgical sealant qualifies as an exempt medical drug because it is (1) used in the diagnosis, cure, mitigation, treatment or prevention of diseases; (2) applied to an internal part of the human body; (3) approved by the U.S. Food and Drug Administration (USFDA) for sale as medicine; (4) sold/dispensed to customers including surgeons, licensed practitioners, hospitals, clinics on prescription by a person authorized to prescribe medicines; and (5) administered by surgeons or at the surgeon's direction. The single use kit containing the sealant is also exempt when sold because, even though the kit may contain some items that would be subject to tax when sold separately, the kit as a whole is (1) used to treat, prevent, or diagnose human disease, illness, or injury and is incorporated into a patient by a licensed practitioner; (2) dispensed under federal and state law only by prescription or order of a licensed practitioner; and (3) intended for use on a single patient and not intended to be reusable.

While the applicator spray tips may be sold separately from the kit, these items are still exempt because of how they are labeled. The product labeling states that these items are medical supplies that are meant to be used in the application of the exempt chemical compound to the patient's lungs. They are dispensed only under federal or state law only by the prescription or order of a licensed practitioner and may only be used on a single patient. Therefore, the applicator spray tips will be exempt from tax even when sold separately from the kit.

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