Michigan Sales Tax Exemption for Implants
The Michigan sales tax exemption for implants was expanded when the Michigan Governor signed into law Public Act #46 with an effective date of 3/3/2020. This law modified the definition of prosthetic devices that qualify for exemption when purchased by a Hospital, or Freestanding Surgical Outpatient Facilities that are licensed under Part 208 of Michigan’s Public Health Code. The tax professionals at Agile Consulting Group recently filed a request for a Technical Advice Letter to obtain additional clarification as to what will qualify for exemption.
Prosthetic Implant Exemption: Prior to March 2020 Law Change
Prior to this law change in March 2020, the Michigan sales tax exemption for implants was limited to purchases of prosthetic devices that were “resold” to patients of Hospitals and Freestanding Surgical Outpatient Facilities. Prosthetic devices are defined in Mich. Comp. Laws Ann. Sec. 205.51a(q) as a “replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device worn on or in the body” that does one or more of the following:
- Artificially replace a missing portion of the body;
- Prevent or correct a physical deformity or malfunction of the body; or
- Support a weak or deformed portion of the body.
The prior rule stated that implantable prosthetic devices were only “dispensed” when sold to a patient. Consequently, the implantable prosthetic devices needed to be administered contemporaneously with, or prior to, the transaction for which the exemption is claimed, rather than some future transaction for the exemption to apply. Michigan Letter Ruling 2019-2 offers a more detailed explanation of the exemption requirements prior to 3/3/2020.
Prosthetic Implant Exemption: After March 2020 Law Change
The law change that expanded the Michigan sales tax exemption for implants in Mich. Comp. Laws Ann. Sec. 205.54ff, specifically for hospitals and freestanding outpatient surgical facilities, eliminated the dispensed pursuant to a prescription requirement. Hospitals and freestanding outpatient surgical facilities now must only prove that the implantable prosthetic device meets the definitional criteria of a prosthetic device listed in Mich. Comp. Laws Ann. Sec. 205.51a(q).
Some examples of implantable prosthetic devices that clearly qualify for exemption are:
- Artificial knees, hips & shoulders
- Pacemakers
- Intra-Ocular Lenses (IOLs)
- Stents
These devices will qualify for exemption as they either artificially replace a portion of the body, prevent or correct a physical deformity of the body, or support a weak or deformed portion of the body. These items are all implanted in the body and are meant to be in the body permanently or for an extended period of time.
The Michigan sales tax exemption for implants that are “inserted” or “attached” to the body for a short period of time is currently ambiguous, and the tax professionals at Agile Consulting Group have requested a Technical Advice Letter from the Michigan Department of Treasury to see if such implantable prosthetic devices will qualify for exemption. Some examples of prosthetic devices that are temporary inserted or attached to a person that “may” qualify for exemption are items such as:
- Endotracheal tubes
- Foley catheters
- Intravenous catheters (like PICC lines)
- Sutures
How to Recover Michigan Sales Tax Already Paid to Vendors
Michigan Hospitals and Freestanding Surgical Outpatient Facilities that have already made qualifying purchases under the Michigan sales tax exemption for implants, as provided in Mich. Comp. Laws Ann. Sec. 205.54ff, can request a refund up to four years from of the original date of purchase. Michigan Department of Treasury Form 5633 is used to request the refund directly from the Department. One Form 5633 is completed for each vendor and the following purchase information must be provided:
- Invoice Number
- Invoice Date
- Purchase Amount
- Tax Refund Requested
- Type of Tax (Sales or Use)
- Description of the item purchased
The vendor also completes a portion of the form attesting that the sales tax listed on the transaction schedule provided by the hospital or freestanding surgical outpatient facility was indeed collected by the vendor and paid to the Michigan Department of Treasury. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Michigan Department of Revenue and can assist any Michigan Hospital or Freestanding Surgical Outpatient Facility with this cumbersome process.
Reach Out to Us with Questions
If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.
