Definition change impacts sales tax

Some state agencies have changed how they interpret definitions for home medical equipment. These don’t line up with those used by the medical equipment industry, and are cause for confusion over what is exempt from sales tax. For instance, prosthetic devices and durable medical equipment for home use are among items that are tax exempt, while accessories such as oxygen masks and tubing are not.

Rep. Duane Quam (R-Byron) sponsors HF573 that would expand the exemption for items covered by Medicare, Medicaid and other health plans and change the definition of durable medical equipment to include all accessories and supplies.

This addresses recent agency interpretation of statute that may not follow the intent of the original legislation, he said. “We have to then go back, through legislation, to clarify and return original intent.” The bill was held over by the House Taxes Committee March 8 for possible omnibus bill inclusion. It has no Senate companion.

“There’s no way for us to comply with (current law),” said Jackie Anderson, owner of Key Medical Supply, Inc. “The definition changes that occurred in the original legislation compared to the reality of how things operate in our industry are too cumbersome.”

As an example, she said some health care equipment comes in kits, with some parts being taxable and others not. “We have to look at the components of these kits to determine which are taxable and which are not, even though we buy them as kits and sell them as kits.”

Some language would need to be altered to conform the current state to the Streamlined Sales and Use Tax Agreement, which assists states to administer a simpler and more uniform sales and use tax system, according to nonpartisan House Research Department staff.

The bill also has a cost. According to the Department of Revenue, it would impact the General Fund by $14 million in fiscal year 2012.