Medical Supplies Used for Testing Taxable in North Carolina

Monday, August 31st, 2015

A doctor putting on gloves.
North Carolina

The North Carolina Business Court ("Court") ruled that medical supplies used for prescribed tests were taxable.

The taxpayer conducted sleep study testing. The taxpayer performed sleep study tests prescribed by doctors. It used various supplies to perform these tests, including cleaners, sensors, exam gloves, disinfectant, and batteries. A patient's prescription for sleep testing did not entitle the patient to purchase these supplies, and the taxpayer did not itemize the supplies on invoices to patients. Instead, it billed a lump sum for sleep study testing.

North Carolina exempts durable medical supplies sold on prescription. The taxpayer argued that its supplies qualified for this exemption.

The Court determined that the taxpayer's supplies were not "sold on prescription." The taxpayer consumed the supplies during testing. It did not transfer ownership of the supplies to patients, so there was no sale to the patients. Also, the patients' prescriptions were for testing, not for supplies. The supplies themselves were not prescribed, so they were taxable.

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