Tennessee Rules Catheters Used to Treat Venous Reflux Disease Are Subject to Sales Tax

Friday, August 17th, 2012


The Tennessee Department of Revenue (DOR) recently ruled that sales of a single-use catheter used to treat venous reflux disease are subject to sales tax. Tenn. Ltr. Rul. No. 12-09 (Dept. of Revenue July 10, 2012). In the ruling, the DOR also explained that sales of medical kits that contain the catheter, in addition to other items used to treat the same condition, are likewise taxable.

The taxpayer that requested the ruling sells products used to treat venous reflux disease. In a patient with venous reflux disease, the valves within the veins do not function properly. The valves do not stop blood from flowing backwards, so blood becomes pooled in the legs. This causes the veins to expand, a condition known as varicose veins. The catheter in question is a minimally invasive single patient use catheter; it is inserted and removed during the same medical procedure and allows for rapid and uniform ablation of the vein. The taxpayer also sells different types of kits or packs that combine all supplies necessary for venous reflux disease treatment procedures into a single use, sterile package. The taxpayer asked whether its sales of the catheters and the kits were subject to tax.

Tennessee taxes sales of tangible personal property, including medical devices and supplies, but the state provides product-based exemptions for several types of medically related items. For instance, Tennessee exempts "prosthetic devices for human use" from sales tax. Tenn. Code Ann. sec. 67-6-314(1). And, Tennessee defines "prosthetic device" as "a replacement, corrective, or supportive device . . . worn in or on the body to: (i) artificially replace a missing portion of the body; (ii) prevent or correct physical deformity or malfunction; or (iii) support a weak or deformed portion of the body." Tenn. Code Ann. sec. 67-6-102(72)(A).

The DOR explained that when considering catheters, "the most commonly applicable exemption is the exemption for prosthetic devices." The DOR reasoned that, even though the catheter at is used to correct a malfunction in the valve of the diseased vein, it did not satisfy the requirement that it be worn in or on the body because it is inserted and removed during the same procedure. Thus, the DOR ruled that the catheter did not qualify as an exempt prosthetic device, so sales of the catheter are taxable.

The DOR went on to explain the taxpayer's kits are also subject to tax because the kits contain taxable items and Tennessee taxes sales of medical kits unless all of the items in the kit qualify for a specific exemption.

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