On June 27, 2013, the Washington Department of Revenue ruled that several medical devices used to deliver saline were subject to sales and use tax. Hospitals purchased the medical devices and other items from vendors that did not charge sales tax. And Hospitals did not remit use tax on the devices and did not charge their patients sales tax for the items.
Washington exempts from sales and use tax “disposable devices used or to be used to deliver drugs for human use, pursuant to a prescription.” Exempt devices are “single use items such as syringes, tubing, or catheters” or, as the Department reasoned, items “similar to” or “of the same general class” as these items. Because the statute did not define “syringes, tubing, or catheters,” the Department applied the “ordinary dictionary meaning” of the terms. Looking to Webster’s Third New International Dictionary, the Department concluded that the “essential characteristic of syringes and catheters [for purposes of the sales tax exemption is] that they facilitate the injection of fluids into the human body via insertion into the human body, and that is what they are designed to do.”
The Department first had to determine whether the saline delivered by the devices constituted a prescribed drug as used by the Hospitals. It did. The Department explained: “Although saline may seem to be a common solution used in numerous procedures, saline in the specific procedures requiring the use of the devices at issue, may only be dispensed at the [Hospitals’] facilities pursuant to a prescription by a licensed individual. The saline as used in the [Hospitals'] procedures . . . meets the definition of drug.”
With the above understandings, the Department analyzed each device and ruled that each was taxable.
- The Hydro Thermablator Kit “includes a control unit, rolling cart, a pole, and a fluid heater canister used to heat, monitor, and circulate temperature-controlled saline solution through the uterine cavity to perform endometrial ablation.” Although the device as used in the procedure injects heated saline into the uterus, its function was not that of a syringe.
- The Bipolar Tissue Sealer is used to cauterize or seal ruptured blood vessels during surgery. Saline promotes healing in the area; however, “[i]ntroducing saline to prevent burning is not similar in nature to a syringe, catheter or tubing, which facilitate the injection of fluids into the human body via insertion into the human body.”
- The Hook Sealing Endoscopy seals blood vessels and bile ducts to reduce blood loss and bile leaks. But the “injection of saline is not similar in nature to that of a syringe, catheter or tubing, because the purpose of the device is to seal blood vessels and bile ducts.”
- The Cath EP Thermocool allows “for efficient fluid delivery within the catheter itself and . . . allow[s] heat to dissipate across the catheter tip.” Because the saline is being used to regulate the temperature of the catheter itself and isn’t designed to inject fluids into the human body, it is not exempt.
- The Clearview Mister Blower enhances visualization at the surgical site by keeping the area clear of blood during coronary suturing. Because the saline’s purpose was to blow blood away from area, the Department found that the device did not deliver a prescribed drug for human use. And the device was not similar to a syringe, catheter or tubing designed to facilitate the injection of fluids into the human body via insertion into the human body.
In a non-saline ruling, the Department found that suction canisters were not exempt prosthetic devices because they were not worn on the body.
The Department’s ruling can be viewed in full here.