WAC 188-01

Audits of the Medical Industry Cancelled 07/17/02. Audits of the Medical Industry--This directive to provide interim tax policy guidance in some general areas related to the medical industry. It primarily provides guidance regarding the taxability of delivery systems, dual purpose systems, prosthetic and orthotic devices, prepackaged kits, and reagents. The issues addressed in this directive are currently addressed in either WAC 458-20-18801 or other published determinations of the Department, including but not limited to Det. 91-077, 11 WTD 095, Det. 91-261, 11 WTD 439, Det.

Hospital Guide

"Sale," "casual or isolated sale," "lease or rental."

Exemption -- Compensation for patient services or attendant sales of drugs dispensed pursuant to prescription by certain nonprofit organizations.

Exemptions -- Sales of prescription drugs.

Exemptions -- Certain medical items.

Exemptions -- Certain medical items.

Prescription drugs, prosthetic and orthotic devises, ostomic items, and medically prescribed oxygen.Effective 3/20/92

Medical substance, devices, and supplies for humans - Drugs prescribed for human use - Medically prescribed oxygen - Prosthetic devices - Mobility enhancing equipment - Durable medical equipment WAC 458-20-18801 (Rule 18801). This rule explains the B&O and retail sales tax reporting responsibilities of persons selling medical products such as prescription drugs, over-the-counter drugs, prosthetic devices, and durable medical equipment.

Taxability of Reagents and other Diagnostic Substances Revised 2/2/09 See ETA 3064.2009

Taxability of Reagents and Other Diagnostic Substances This ETA addresses the taxability of reagents and other diagnostic substances based on the statutory provisions of RCW 82.08.0281 as they existed for periods prior to July 1, 2004. The ETA is out of date and no longer has application today. The Department’s current interpretation and application of law in this area is contained in WAC 458-20-18801.

Taxability of reagents and other diagnostic substances

Warehousing/Reselling Prescription Drug B&O Tax Preference. This ETA addresses the requirements to qualify for preferential tax treatment under RCW 82.04.272, and in particular the requirements for sellers and buyers relating to “engaging in the business of warehousing and reselling drugs for human use pursuant to a prescription.”

KIDNEY DIALYSIS MACHINES AND HEART PACEMAKERS SALES AND USE TAX EXEMPT See Rule 18801 for identification of tax exempt items. RCW 82.08.945 and 82.12.945, effective July 1, 2004, provide sales and use tax exemptions for kidney dialysis machines. Implanted pacemakers qualify as prosthetic devices under the definition of "prosthetic device" in RCW 82.08.0283 that becomes effective July 1, 2004. Cancelled effective 6/30/04.

B&O Tax Deduction for Physicians and Clinics that Dispense Drugs by Infusion or Injection

Molds - Use by Orthotic and Prosthetic Manufacturer

Recreational and Medical Marijuana – Repeal and Clarification of Excise Tax Deductions, Exemptions, and Preferential Rates

"New Buyers" Retail Sales Tax Exemption Certificate

Taxability of Reagents, Controls, and Calibrators - Cancelled effective June 30, 2005 - See ETA 2027

Recreational and Medical Marijuana – Repeal and Clarification of Excise Tax Deductions, Exemptions, and Preferential Rates

Tax Exemptions for Temporary Medical Housing Provided by Health or Social Welfare Organizations

Eyeglass Frames and Medical Items

Temporary Sales and Use Tax Exemptions for Medical Marijuana from Collective Gardens

Naturopathic Medicines - Tax Exemption

B&O Tax Deduction for Physicians and Clinics that Dispense Drugs by Infusion or Injection

Federal Excise Tax on Medical Devices

B&O Tax Deduction for Physicians and Clinics that Dispense Drugs by Infusion or Injection

TAXPAYER'S EXCEPTIONS: The sole issue presented is whether use tax is properly levied upon the taxpayer's use of braces, collars, wires, screws, and bonds, etc., in the conduct of an orthodontic dental practice.The taxpayer contends that these items are exempt from retail sales tax as sales of orthotic devices under RCW 82.08.0283.The assessment of use tax on items that are obviously not orthotic devices such as floss, polishing and cleansing agents, etc., is not protested.Nor does the taxpayer protest the assessment upon orthodontic supplies for the period prior to [June 1980], the effecti

PRESCRIPTION DRUGS -- SALES AND USE TAXES -- EXEMPTION -- MEDICAL GASES -- DELIVERY SYSTEMS. Medical gas delivery system components, including tubes, nebulizers, ventilators, masks, cannulae and similar items, are conceptually distinct from the prescribed medical gases they deliver and, therefore, are exempt from sales and use taxes. Accord: Deaconess, supra.

PROSTHESES -- DRAINAGE DEVICES -- SALES AND USE TAXES -- EXEMPTION. Drainage devices which are particularly prescribed for use on or in specific patients are exempt from sales and use taxes as prostheses because they either replace missing body parts or assist dysfunctional ones. The exemption applies even if the prostheses are not permanent replacements for body parts. Accord: Deaconess, supra.

PROSTHESES -- PRESCRIPTION DRUGS -- AIRWAY DEVICES -- SALES AND USE TAXES -- EXEMPTION. Various airway devices (tubes) which are prescribed to keep patients' airways open and to deliver medical gases are exempt from sales and use taxes because one, they are part of medical gas delivery systems and therefore qualify for the prescription drugs exemption and two, they replace the function of the body's own airway. The exemption applies even if the devices are used only temporarily. Accord: Deaconess, supra.

PRESCRIPTION DRUGS -- SALES AND USE TAXES -- EXEMPTION -- SYRINGES.Syringes, whether purchased empty or with legend drugs contained in them, are not conceptually distinct from the prescribed drugs they subsequently deliver and, therefore, are exempt from sales and use taxes.Accord: Deaconess Medical Center v. Dept. of Rev., Docket No. 87-2-2055-7 ( Thurston County Superior Court, 1989).

PRESCRIPTION DRUGS. All levels of sales of legend drugs are exempt from sales and use taxes if the drugs are prescribed in the diagnosis, cure, mitigation, treatment or prevention of disease in patients. RPM 91-1.

RETAIL SALES AND USE TAXES -- PROSTHETIC DEVICES -- DEFINITION. The term "prosthetic device" is not defined by the statute.Use of such devices for cosmetic purposes does not disqualify them as "prostheses" merely because the procedure is voluntary or because the body part replaced or augmented is not technically "missing."ACCORD:Deaconess Medical Center v. Department of Rev., Docket Number 87-2-2055-7. (Thurston County Superior Court, 1988), Det. No. 90-97, 9 WTD 195 ( 1990).Also cited:Plastic Surgery Clinic of Springfield, Inc. v. Director of Revenue, Case No.

LABORATORY REAGENTS -- TESTING -- RETAIL SALES TAX EXEMPTION.The exemption granted for laboratory reagents because of the Deaconess case is available only when the items are used for the treatment of a specific patient when the reagents are used for testing blood to determine the presence of a disease and the type of the blood, and they are not prescribed for a specific patient as required by RCW 82.08.0281 and Deaconess, they are not eligible for the exemption.Accord:Deaconess Medical Center v. Department of Rev., 58 Wn.App. 783 (1990).

SALES -- BLOOD -- TISSUE -- HOSPITALS -- RESALE -- PRESCRIPTION ITEMS.Sales of blood to hospital for resale to patients are sales of tangible personal property.As such, they are taxable under the wholesaling classification of the B&O tax, and not subject to retail sales tax.When the blood is sold directly to a patient pursuant to a prescription, it is a retail sale, but subject to the prescription drug exemption of RCW 82.08.0281.

RETAIL SALES TAX -- EXEMPTIONS -- PROSTHETIC DEVICES. Dental device implanted below patient's gums and used to guide regeneration of bone and tissue is a prosthetic device under the statute. Fact that device is eventually absorbed by the body or surgically removed is not determinative where implantation occurs. ACCORD: Deaconess Medical Center v. Department of Rev., Docket No. 87-2-2055-7 (Thurston County Superior Court, 1988); Det. No. 90-97, 9 WTD 195 (1990).

RETAIL SALES/USE TAX -- EXEMPTION -- TENS UNIT. Because a TENS unit is not an artificial substitute which physically replaces missing parts of the human body, such as the nervous system, it is not a prosthetic device. A TENS unit actually blocks--by whatever means--the transmission of pain from the site of injury to the brain and thus impedes the nervous system.

RETAIL SALES/USE TAX -- EXEMPTION -- PRESCRIPTION DRUG-- "OTHER SUBSTANCE" -- TENS UNIT. Although a patient must have a prescription to obtain a TENS unit, the unit is a "piece of equipment" or "a device." As such, does not qualify for exemption under RCW 82. 08.0281 and WAC 458-20-18801. Although certain medical-delivery devices have been held to be exempt along with the prescription drugs they deliver, a TENS unit cannot be so classified.

RETAIL SALES/USE TAX -- EXEMPTION -- FEDERAL GOVERNMENT -- MEDICARE ASSIGNMENTS. When a provider takes an assignment of a patient's rights to Medicare reimbursement, the patient--and not the federal government--is still the buyer and user of the product or service. The patient will owe retail sales tax or use tax to the state. This is an obligation separate and apart from the amount charged and accepted under the Medicare assignment agreement, and the provider only collects these amounts and holds them in trust for the state.

SALES TAX -- EXEMPTION -- SUTURES. Surgical sutures, clips and staples along with disposable instruments, such as staple guns, clip appliers, loading units (cartridge devices) which apply these items to patients, are exempt from sales and use tax. Sales of non-disposable or reusable staple guns, clip appliers and loading units are taxable. Staple removers are subject to tax whether disposable or reusable.

SALES TAX -- EXEMPTION -- LAPAROSCOPIC INSTRUMENTS. Laparoscopic instruments such as trocars, converters, sleeves, shears, grasps, dissectors are surgical tools or instruments and are not themselves prosthetic or orthotic devices or ostomic items. Furthermore, these laparoscopic instruments do not convey or deliver exempt items such as sutures, medical gases or prescribed drugs. Therefore, these instruments when sold alone are subject to sales tax whether they are disposable or reusable.

SALES TAX -- EXEMPTION -- MEDICAL GASES -- PNEUMOPERITONEUM NEEDLES. Disposable, pneumoperitoneum needles are exempt from sales tax when they deliver prescribed medical gases to patients because the needles are part of the delivery system of an exempt item. If the needles are reusable on more than one patient, then they are taxable as part of a hospital's surgical equipment.

SALES TAX -- EXEMPTION -- KITS OR PACKS OF SURGICAL INSTRUMENTS. Kits or packs containing many or all of the laparoscopic items, including trocars, sleeves, converters, needles, etc. along with the exempt surgical clips and disposable clip appliers are exempt as a unit from sales tax when the kits or packs are sold as such. The exemption for the kits applies because exempt items (the clips and disposable clip appliers) perform a primary purpose of the kits (wound closure).

SALES TAX -- EXEMPTION -- SURGICAL INSTRUMENTS. Purse string instruments, ligating loops, forceps, sizers, and trocar tips are not prosthetic or orthotic devices or ostomic items. Furthermore, they do not deliver exempt items such as sutures or prescribed drugs. Thus, all of them are surgical instruments only, which are taxable whether disposable or not.

SALES AND USE TAXES -- SYRINGES, VIALS OR TUBES -- DIAGNOSIS OR PLASMA -- EXEMPTION. Empty syringes, vials or tubes which draw blood or other body fluids from patients for diagnostic purposes or to obtain plasma are not tax exempt. These items do not deliver prescription drugs to patients.However, if these items contain a prescribed reagent when the blood or fluid is drawn into them then they are exempt, because the reagent is exempt. Accord:Deaconess Medical Center v. Dept. of Revenue, 58 Wn.App. 783 (1990), Deaconess Medical Center v. Dept. of Revenue, Docket No.

DURABLE MEDICAL GOODS -- SALES AND USE TAXES. Pumps, machines, parts, computers, medical gas tanks, hoses and similar items are not exempt from sales or use taxes if they are sold to hospitals and not resold to patients.

SALES AND USE TAXES -- EXEMPTION -- PRESCRIPTION DRUGS -- CATHETERS. Catheters which deliver prescription drugs or contrast media into patients are exempt from sales and use taxes, even if they perform other functions. Accord:Deaconess Medical Center v. Dept. of Revenue, Docket No. 87- 2-2055-7 (Thurston County Superior Court, 1989).

SALES AND USE TAXES -- EXEMPTION -- PRESCRIPTION DRUGS -- TRAYS OR KITS. Trays or kits which contain catheters, needles, scalpels, guide wires, syringes, and reusable ports are exempt in whole from sales and use taxes if they include a prescription drug with a primary purpose to diagnose, cure, mitigate, treat or prevent disease or other human ailments.

SALES AND USE TAXES -- PRESCRIPTION DRUGS -- SYRINGES -- MULTIPLE PATIENTS. Multiple-use syringes are not sales or use tax exempt if they are not prescribed for the particular use of specific patients. Such syringes are part of a hospital's durable medical or surgical equipment.Accord:Deaconess Medical Center v. Dept. of Revenue, 58 Wn.App. 783 (1990), Deaconess Medical Center v. Dept. of Revenue.Docket No. 87-2-2055-7 (Thurston County Superior Court, 1989).

PROSTHESES -- PRESCRIPTION DRUGS -- BITE STICKS -- SALES AND USE TAXES. Bite sticks or blocks are not exempt from sales or use taxes because they neither deliver prescription drugs nor replace a body part or function. Accord: Deaconess Medical Center v. Dept. of Revenue, Docket No. 87-2-2055-7 (Thurston County Superior Court, 1989 ).

SALES AND USE TAXES -- EXEMPTION -- CONTRAST MEDIA -- DELIVERY SYSTEMS. Inflation devices from which contrast media are released into balloon catheters to inflate the balloons when used under a physician's order on specific patients are exempt from retail sales and use taxes as part of the contrast media's delivery system. The contrast media do not need to be released into the patient's body.

RETAIL SALES TAX – LEASING DURABLE MEDICAL EQUIPMENT. A lease of durable medical equipment is not exempt from retail sales tax when the lessor is merely leasing the equipment to a patient pursuant to a third-party physician’s prescription. Further, the equipment is not a tax-exempt prescription drug or other substance because it is not part of the delivery system for prescribed drugs or other substances.

B&O TAX – DRUGS – SALE OF –ADMINISTRATION. Only those drugs sold and physically administered by the seller are taxable under the services and other activities classifications of the B&O tax. Drugs sold to patients or their caregivers for either patient self –administration or administration by a caregiver other than the seller are taxable under the retailing classification of the B&O tax.

PROSTHETIC DEVICE -- DIALYSIS MACHINE. Dialysis machine is treated as a prosthetic device for purposes of sales and use tax exemption even though it does not physically replace the disfunctioning kidneys.

PROSTHETIC DEVICE -- INGREDIENTS OR COMPONENTS -- DIALYSIS MACHINE. Reusable dialyzer (artificial kidney) and various single-use, disposableitems such as needles, tubing, filters, etc. are exempt from sales and use tax as "ingredients or components of prostheses," because they are functionally inseparable from the process of dialysis and are functionally integral with the tax exempt machine.

RCW 82.04.050(3)(g): SALES TAX – PHYSICAL FITNESS SERVICES -- WEIGHT TRAINING – INSTRUCTIONAL. Members who participated in a health club’s personal strength program primarily to enhance fitness, strength, or improve their health, paid for physical fitness services. Instructional benefits were secondary.

RCW 82.08.0281, RCW 82.04.4289: SALES TAX -- PRESCRIPTION – PHYSICAL FITNESS SERVICES.Charges for exercise prescribed by physicians were subject to retail sales tax.The prescription drug exemption applies to drugs and substances, not services.

RETAIL SALES AND USE TAX – EXEMPTION – PRESCRIPTION DRUGS – “LABORATORY REAGENTS” AND “OTHER DIAGNOSTIC SUBSTANCES. ”Stains, dyes, and decolorizers used by pathologists in the diagnosis of disease, which react with and cause a change in cellular tissue, are exempt from retail sales/use tax. Fixatives, decalcifying solution, dehydrating solution, and clearing reagents are exempt reagents. Paraffin and gelatin are not reagents. Substances with multiple uses are exempt only when used to react with cells.

RULE 18801; RCW 82.08.0283: SALES TAX – EXEMPTION – PROSTHETIC DEVICE – CPAP AND BI-PAP MACHINES. For the purpose of the prosthetic device exemption, to wear a device means the entire device or system is something a person puts on or has on their person, to be carried with and habitually become part of the person as a whole, much in the sense that a person wears clothing or other personal items. Such devices are designed to be wholly worn and portable, not partially floor-standing, or moved by virtue of dragging, wheels, or with the assistance of a separate device (e.g.

RCW 82.08.0281:RETAIL SALES TAX -- EXEMPTION- PRESCRIPTION DRUGS – DIETARY SUPPLEMENTS - LICENSED DISPENSARY – ADVANCE REGISTERED NURSING PRACTITIONER (ARNP). For periods prior to January 1, 2004, dietary supplements prescribed and dispensed by an advanced registered nursing practitioner were not entitled to a retail sales tax exemption for prescription drugs because they were not dispensed by a licensed dispensary.

RULE 168, RULE 151, RULE 18801, RULE 224; RCW 82.04.290, RCW 82.08.020: B&O TAX -- MEDICAL CLINIC -- PRESCRIPTION DRUGS -- TRUE OBJECT. A medical clinic that administers chemotherapy drugs is taxable under the Service & Other B&O tax classification. Under the true object test, the clinic is performing a medical service, rather than engaging in the sale of tangible personal property subject to retailing B&O tax.

USE TAX -- EXEMPTIONS -- PRESCRIPTION DRUGS -- DRUG SAMPLES. The use tax exemption of Revised Code of Washington (RCW) 82.12.0275 is available only for patient/users and consumers of prescription drugs for whom such drugs are prescribed, the exemption is not available for persons who distribute free " sample drugs" to promote further sales.

USE TAX -- TAX MEASURE -- VALUE OF ARTICLE USED -- GIFTS. The value of articles given away is to be determined as nearly as possible by the retail selling price of similar articles. Where no such similar retail value exists, the value of articles gifted in this state shall be determined by the total costs of production, (Rule 178 to be so amended).

RCW 82.08.808 – RETAIL SALES TAX – EXEMPTIONS – MEDICAL SUPPLY MATERIALS – COMPREHENSIVE CANCER CENTERS. The retail sales tax does not apply to the sale of liquid nitrogen used to store tissue samples, because that liquid nitrogen constitutes medical supply “materials” used by a qualified comprehensive cancer center.

RCW 82.08.0283: RETAIL SALES TAX – PROSTHETIC DEVICE. A medical device that delivers cold compression therapy to an injured body part and is not entirely worn on the body does not qualify as an exempt prosthetic device under RCW 82.08.0283.

RCW 82.08.0283: RETAIL SALES TAX – PROSTHETIC DEVICE. A medical device worn entirely on the body that electronically generates bone to aid in bone repair and bone fusion is an exempt prosthetic device under RCW 82.08.0283.

RCW 82.08.945 – RETAIL SALES TAX – EXEMPTIONS – KIDNEY DIALYSIS DEVICE. A monitoring device used in kidney dialysis that is an integral accessory and part of the device prescribed to treat renal failure and related conditions is a kidney dialysis device exempt from retail sales tax under RCW 82.08.945.

RCW 82.08.0283: RETAIL SALES TAX – PROSTHETIC DEVICES. CPAP devices that are not entirely worn on the body are not exempt prosthetic devices under RCW 82.08.0283. Portable CPAP devices that are entirely worn on the body are exempt prosthetic devices under RCW 82.08.0283.

RCW 82.08.0281: RETAIL SALES TAX – PRESCRIPTION DRUGS. CPAP devices are not prescription drugs that exempt from retail sales tax under RCW 82.08.0281.

RCW 82.08.0281: RETAIL SALES TAX – EXEMPTION – SALE OF PRESCRIPTION DRUG. The sale of packaging materials for packaging drugs prior to dispensing the drugs to a patient pursuant to a prescription is not a sale of drugs exempt from retail sales tax under RCW 82.08.0281.

PRESCRIPTION DRUG. The sale of packaging materials for packaging drugs prior to dispensing the drugs to a patient pursuant to a prescription is not a sale of drugs exempt from retail sales tax under RCW 82.08.0281.

RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – DISPOSABLE DEVICE – HYDRO THERMABLATOR. A hydro thermablator is not exempt from sales and use taxes.

RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – DISPOSABLE DEVICE – BIPOLAR TISSUE SEALER. A bipolar tissue sealer is not exempt from sales and use taxes.

RULE 18801; RCW 82.08.935, RCW RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – DISPOSABLE DEVICE – CATH EP THERMOCOOL. A cath ep thermocool is not exempt from sales and use taxes.

RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – DISPOSABLE DEVICE – CLEARVIEW MISTER BLOWER. A clearview mister blower is not exempt from sales and use taxes.

RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – PROSTHETIC DEVICE – SUCTION CANISTERS. Suction canisters are not exempt from sales and use taxes.

RULE 18801; RCW 82.08.935, RCW RULE 18801; RCW 82.08.935, RCW 82.12.935: RETAIL SALES TAX – USE TAX – PRESCRIPTION DRUG EXEMPTION – DISPOSABLE DEVICE – CATH EP THERMOCOOL. A cath ep thermocool is not exempt from sales and use taxes.

RCW 82.08.925: RETAIL SALES TAX – EXEMPTION – DIETARY SUPPLEMENTS – PRESCRIPTION – CHIROPRACTOR. RCW 82.08.925 provides a retail sales tax exemption for “sales of dietary supplements for human use dispensed or to be dispensed to patients, pursuant to a prescription.” A chiropractor’s sales of dietary supplements to patients do not qualify for the exemption in RCW 82.08.925 because chiropractors are not authorized under Washington law to prescribe or dispense drugs.

RCW 82.08.0283: RETAIL SALES TAX – EXEMPTION – PROSTHETIC DEVICE – DURABLE MEDICAL EQUIPMENT – REUSABLE – INFUSION PUMP: Reusable bedside programmable drug infusion pumps are not exempt from retail sales tax as prosthetic devices.

RCW 82.08.935: RETAIL SALES TAX – EXEMPTION –PRESCRIPTION DRUGS – DELIVERY EQUIPMENT – DISPOSABLE – REUSABLE – DRUG INFUSION PUMPS: Sales of reusable drug infusion pumps and modules were not exempt under RCW 82.08.935 because they were not disposable, but reused.

RULE 18801; RETAIL SALES TAX – EXEMPTION – REUSABLE DURABLE MEDICAL EQUIPMENT: Rule 18801 cannot be an independent basis for exempting the sales of reusable durable medical equipment when there is no statutory basis to do so.

RULE 18801; RCW 82.08.0281: RETAIL SALES TAX – CANNABIS – MARIJUANA – PRESCRIPTION. A collective medical garden must charge its customers retail sales tax on their purchases of marijuana when they present written medical authorizations from their health care professional rather than prescriptions.

RCW 82.08.0281; RCW 82.08.935: RETAIL SALES TAX – EXEMPTION – SALE OF DISPOSABLE DEVICES. The essential characteristic of exempt disposable devices under RCW 82.08.935 is that they send prescription drugs into the human body via insertion into the human body, and that is what they are designed to do.

Sales Tax -- Exemption -- Intravenous Sets. Intravenous sets used to deliver intravenous solution into a medical patient's body are not entitled to the prescription drug exemption from use or sales tax, since they are not prescription drugs as defined in the prescription drugs exemption statutes, RCW 82.08.0281 and RCW 82.12.0275.

Sales Tax -- Exemption -- Prescription Drugs. Prescription drugs are exempted from sales or use tax under RCW 82.08.0281 only if they have been prescribed at the time of sale.Sales of drugs based on the intent to dispense a drug pursuant to a prescription are not exempted.Thus, prescription drugs not clearly billed to hospital patients by means of a "line item" billing entry have not been sold to the patients and the hospitals are liable for the tax on the sale between the supply house and the hospital.

Sales Tax -- Exemption -- Prescription Drugs. Irrigation solutions, laboratory reagents, and nutrition products do not qualify for the prescription drug exemption from sales or use tax under RCW 82.08.0281 and RCW 82.12.0275 unless there is a separate entry on a hospital patient's bill to document the transaction, because they have been consumed by the hospital in the delivery of their medical services.

Sales Tax -- Exemption -- Prosthetic Devices. The clear legislative intent is to interpret tax exemption laws narrowly.The definition of prosthetic devices in the exemption laws should not be broadened to include temporaryreplacements of missing parts of the human body, including heart-lung machines or infusion pumps. RCW 82.08.0283; 82.12.0277; WAC 458-20-18801.

B&O TAX -- RETAIL SALES TAX -- PHYSICIANS -- DRUGS. When a physician administers a drug via injection to treat an allergic patient, the physician is considered to have sold the drug as tangible personal property if he itemizes the charge.Such activity is considered a retail sale, which is separate, for state tax purposes, from the rendering of professional services. The physician's acquisition of the drug is for resale so is not subject to retail sales tax.

Sales Tax -- Exemption -- Orthotic Devices. Pelvic traction belts, post-operation shoes, cast shoes, pulley clamp assemblies, and traction cords are not "orthotic devices" exempt from sales tax paid by a hospital, since these items are not specially fitted or unique to one patient as required by WAC 458-20-18801 in order to be exempt. The items are considered to be consumed by the hospital, not the patient. RCW 82.08.0283; RCW 82.12.0277

USE TAX -- EXEMPTIONS -- PRESCRIPTION DRUGS -- DRUG SAMPLES. The use tax exemption of RCW 82.12.0275 is available only for patients/users/purchasers of prescription drugs for whom such drugs are prescribed. The exemption is not available for persons who distribute free sample prescription pharmaceuticals as a marketing tool to promote subsequent sales of the product.

USE TAX -- EXEMPTION --PROSTHETIC DEVICES. The prosthetic device exemption to the use tax applies only to the device and those materials which become a part of the device, not tools or patterns used to make the device.

Upheld 4WTD299 Swedish Hospital Medical Center, Appellant, v. State of Washington, Department of Revenue,Docket No. 86-28 Re: Appeal of Department of Revenue Final Determination No. 85-51A

B&O TAX -- PHYSICIANS -- DRUGS. The sale and administration of drugs by a physician to a patient is exempt of retail sales tax because of the prescription drug exemption, but it is subject to Service B&O tax rather than Retailing B&O because it is part of the medical services rendered by the physician.Department of Rev. v. Deaconess Hospital, No. 6098-I-II, Division Two, January 5,1984.

Use Tax -- Exemption -- Prescription Drugs. Samples of prescription pharmaceuticals distributed by the manufacturer to physicians were not exempt from use tax pursuant to the prescription drug exemption set forth in RCW 82.12.0275 and WAC 458-20-18801. This exemption has been strictly construed to encompass only patients who purchase prescription drugs. The company that makes the drugs is distributing samples with the goal of increasing sales and is therefore making use of its pharmaceutical samples. Accordingly, the manufacturer is subject to use tax.

Use Tax -- Value -- Cost of Producing Casts Used in Prosthetic Limb Manufacture. The value of casts produced in the manufacture of artificial limbs, which are not produced for sale themselves, is based on the direct and indirect overhead costs of producing the casts under RCW 82.12.010(1) and WAC 458-20-112.

Use Tax -- Exemption -- Prosthetic Devices. The purpose of the exemption from retail sales and use tax for the sale or use of prosthetic devices provided under RCW 82.12.0277 is to exempt injured or handicapped people purchasing necessities from the additional burden of sales and use tax imposed on them.

Use Tax -- Ingredients or Components -- Prosthetic Devices -- Casts Used in Manufacture. A manufacturer of artificial limbs was liable for payment of use tax on casts manufactured in the process of producing a final artificial limb, since these casts were destroyed in the manufacturing process without becoming an ingredient or component of the actual artificial limb eventually produced.RCW 82.12.010; RCW 82.12.0277; WAC 458-20-18801 (1)(f).

RETAIL SALES TAX -- OXYGEN -- CONCENTRATORS.Machines which compress room air and extract oxygen for delivery to medical patients are not exempt under the statute or rule.Exemptions in statute must be narrowly construed, unless the legislature clearly mandates a broader interpretation of its acts.

RETAIL SALES TAX EXEMPTION -- ORTHOTIC DEVICES.Medically-prescribed braces and braces which continuously move hands or legs are "orthotic devices" within the meaning of the statute and rule notwithstanding the fact that such devices may be rented to a patient for the duration of treatment and then returned to the lessor for rental to another person.Disposable items, such as cushioning pads, which are included in "patient kits" rented with the orthotic devices are not themselves orthotics; retail sales tax must be collected on the value of this portion of the rental.

B&O TAX -- SERVICE -- PHYSICIANS -- CLINICS -- DRUGS.Income from charges for drugs administered by a physician or clinic topatients is subject to Service B&O tax rather than Retailing B&O because it is part of the medical services rendered by the physician or clinic. Accord: Det.No. 87-340A, 5 WTD 251 (1988).