Indiana Reverses Position on Certain Medical Devices

Friday, March 26, 2010

In 2008, Indiana ruled that cutting guides sold by a manufacturer to a licensed practitioner for use in surgery were exempt from tax as orthopedic devices. Indiana reasoned that such sales were exempt from tax because "cutting guides are orthopedic devices prescribed by the surgeon who uses the device during surgery."

Indiana has reversed this decision. Indiana now views a sale of cutting guides by a manufacturer to a licensed practitioner as a taxable consumption of tangible personal property. Indiana has now reasoned that "implicit in the exemption" is the requirement that possession of orthopedic devices must transfer to the patient. Since cutting guides are not transferred or 'used' by patients, but are instead used by a surgeon during surgery, sales of these medical devices are subject to tax.

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