This website created and maintained by Peisner Johnson & Company, L.L.P.

Call Us (800) 940-9433

Nevada - 2005 - Letter Ruling Request Submitted to the State of Nevada Regarding the Exempt Status of Post-Operative Garments

{Page 1}

This letter is in response to your request for a written advisory opinion regarding whether post-operative garments (bras and binders), breast implants, and products such as restylane, collagen and botox are exempt from taxation.  You have requested the opinion on behalf of [Omitted].

Please be advised that this written advisory opinion is intended solely for the use and benefit of [Omitted] and is limed to the specific transaction and facts as set forth below.  Accordingly, this response is predicated upon the facts and specific situations below.  Your correspondence received on April 22, 2005.  You are further advised that any subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this advisory opinion is based may subject similar future transactions to a different treatment than expressed in this advisory opinion.

Factual Background

The following pertinent facts were relied upon and form the basis of this advisory opinion.  [Omitted] is a plastic surgeon's office operated by [Omitted].  In his practice, [Omitted] utilizes breast implants, post-operative garments (bras and binders), restylane, collagen and botox products.  You indicate in your letter that the latter three products are injected for cosmetic reasons.  It will be assumed for the purposes of this opinion that restylane, collagen and botox are prescription only and are available only through a licensed physician, and are thereby not sold directly to patients.  You further indicate that the breast implants are used for cosmetic and reconstructive purposes.

Question

Whether the retail sale of breast implants, post-operative garments, and products such as restylane, collagen and botox are subject to sales tax pursuant to NRS 372.283, NRS 374.288, NAC 372.673 and NAC 372.675?

{Page 2}

Analysis

Nevada law imposes sales tax upon all retailers on the gross receipts from the sale of all tangible personal property sold at retail in this state, unless the retailer is otherwise exempted.  NRS 372.105.  Nevada law defines "sale" as "any transfer of title or possession, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, or tangible persoan property for consideration."  NRS 372.060.  "Sales price" includes the total amount for which the property is sold, including services that are part of the sale.  NRS 372.065.  A retailer is defined as "[e]very person engaged in the business of making sales for storage, use or other consumption or in the business of making sales at auction of tangible personal property owned by the person or others for storage, use or other consumption."  NRS 372.055(1).

Additionally, pursuant to Nevada's use tax statute, a tax is imposed for the "use, storage or other consumption" of tangible property sold or utilized in Nevada."  State of Nevada v. Kelly-Ryan, Inc., 110 Nev. 276, 280 (1994); see also NRS 372.185 and NRS 372.080.  "The incidence of Nevada's use tax falls directly upon the party that makes the out-of-state purchase and uses the property within the State." Id.  If an out-of-state retailer fails to collect sales tax in connection with a retail sale of tangible personal property purchased for use in Nevada, the Nevada consumer of that property is liable for the use tax.

With respect to exemptions from the sales and use tax, the Nevada Supreme Court has held that "tax exemptions are strictly construed in favor of finding taxability, and any reasonable doubt whether an exemption applies is construed against the taxpayer."  Nevada Tax Commission v. Nevada Cement Company, 8 P.3d 147, 150 (2000)(quoting Shetakis Dist. v. State, Dept' Taxation, 108 Nev. 901, 907 (1992)).

It is a long standing rule of statutory construction that tax exemptions are to be strictly construed.  Tax exemptions must be strictly construed, and the one applying for a tax exemption must demonstrate clearly a legislative intent to exempt that person or type of person.  See Sierra Pac. Power v. Department of Taxation, 96 Nev. 296, 297, 607 P.2d 1147 (1980).  "Any reasonable doubt about the applicability of an exemption must be construed against the taxpayer." Id.

Breast Implants

In 1995, the Nevada Legislature amended the statute defining medicine, an amendment which was subsequently approved by a majority of voters at the general election in November 1996.  The pertinent statute defines medicine as follows (emphasis added):

(a) "Medicine" means any substance or preparation intended for use by external or internal application to the human body in diagnosis, cure, mitigation, treatment, or prevention of disease or affliction of the human body and which is commonly recognized as a substance or preparation intended for such use.  The term includes splints, bandages, pads, compresses and dressings.
(b) "Medicine" does not include
(1) Any auditory, ophthalmic or ocular device or appliance.

{Page 3}

(2) Articles which are in the nature of instruments, crutches, canes, devices or other mechanical, electronic, optical or physical equipment.
(3) Any alcoholic beverage, except where the alcohol merely provides a solution in the ordinary preparation of medicine.
(4) Braces or supports, other than those prescribed or applied by a licensed provider of health care, within his scope of practice, for human use.

NRS 372.283(2)(a).

In addition to medicine, "prosthetic" devices are referred to in the statute as follows:

1. There are exempted from the taxes imposed by this act the gross receipts from sales and the storage, use or other consumption of:
(a) Prosthetic devices, orthotic appliances and ambulatory casts for human use, and other supports and casts if prescribed or applied by a licenses provider of health care, within his scope of practice for human use.

NRS 372.283(1)(a).

Prosthetic devices are more specifically defined in NAC 372.683 as artificial devices used to replace a missing part of the human body including teeth.  A missing part of the human body is generally viewed as a body part without which a person cannot function.  Examples of such body parts include: limbs, joints, eyes, teeth, or other organ or part thereof.

You indicate in your letter that the breast implants purchase by [Omitted] are used for either one of two purposes: (1) cosmetic; or (2) breast reconstruction.  In general, breast augmentation and reconstruction are elective surgeries.  Further breast implants are more commonly used in cosmetic circumstances rather than to replace a necessary missing part of the human body as interpreted by NAC 372.683.  Consequently, for purposes of taxation, breast implant surgeries are viewed as cosmetic procedures, thereby subject the breast implants to tax.

The Department believes the statute is clear in its language defining prosthetic devices and medicine and that breast implants are not included in either definition.  However, even if the meaning of the statute is subject to more than one interpretation, the ambiguity should be resolved in favor of the Department and in favor of taxation, as required by general rules of statutory construction.

In addition, the legislative history of the act that amended this statute to include the highlighted language indicates that the purpose of the amendment was to exempt taxes on retail sales of "orthotic appliances and ambulatory casts, other supports and casts if prescribed or applied by licensed physician, and splints, bandages, pads, compresses and dressings prescribed, furnished or sold under certain circumstances."  See heading of A.B. 373, 1995 Legislative Session, first printing.  Prior to the amendment, orthotic devices, splints, bandages, pads, compresses, supports, dressings, and braces were specifically excluded from the definition of medicine.  The intent of the legislature in 1995 was to exempt items that are orthotics, used by health care providers such as podiatrists, orthopedic surgeons, physical

{Page 4}

therapists or general practice doctors in ways to relate to orthotics.  The purpose was to allow healing of bone and joint injuries and diseases by allowing casts and braces to be considered medicine.  See Hearing on A.B. 373 Before the Assembly Committee on Taxation, 1996 Legislative Session, 10 (April 6, 1995).  There is absolutely no indication in the legislative history that there was ever any intent to extend the exemption to breast implants.

Restylane, Collagen and Botox

You assert that the restylane, collagen and botox products are injected into the patient for cosmetic reasons.  Based on the Nevada Revised Statutes,  if a substance or product is provided by a physician to the patient for diagnosis, cure, mitigation, treatment or prevention of disease or affliction of the human body, it is subject to taxation.  However, if a non-medical substance or product is provided to patients, it does not meet the statutory medicinal exemption and it is subject to sales tax.  In the present case, restylane, collagen and botox products fall within the definition of non-medicinal substances because the are primarily used for cosmetic purposes and not for medical treatment.

Further, these products are not of the type of treatment that would normally require the use of "medicine" that was intended by the legislature to be exempt from taxation for public policy type reasons, such as reducing health care costs to those least able to afford those costs.  The term "prosthetic devices" are used in NAC 372.683 refers to artificial devices used to replace a missing part of the human body including teeth.  As stated above, these products are used for cosmetic purposes.  Likewise, these products do not qualify as prosthetic devices either.

Consequently, it is the Department's position that the above-mentioned products do not fit within the statutory definition of "medicine" or "prosthetic," as these products are not viewed to be designed for the use of a particular individual to correct or alleviate physical incapacity.  In fact, it would appear that these products are more commonly used for temporary cosmetic improvements to the skin.  Further, if the legislature had intended these products to be exempt, the legislature could have easily made that an express exemption.

Post-Operative Garments

The exemption from medicine in NRS 372.283(2)(a) specifically includes items such as "...splints, bandages, pads, compresses and dressings."  Accordingly, it is the Department's position that specialized garments used post-operatively, when applied by the physician to his patient to facilitate post-operative recovery of the patient, are sufficiently similar to bandages, pads, compresses and dressing to be exempt under the definition of medicine.

Conclusion

Based upon the foregoing authorities and factual representations, it is the opinion of the Nevada Department of Taxation that the transactions involving breast implants, collagen, restylane, and botox are described in this advisory opinion are subject to sales/use tax as contemplated in NRS 372.283, NRS 374.288, NAC 372.673 and NAC 372.675.  The Department is also of the opinion that the transactions involving specialized post-operative

{Page 6}

garments, when applied by the physician under the circumstances described above, are not subject to sales/use tax.  Please be advised that this opinion is subject to the limitations delineated herein.  Accordingly, this advisory opinion is respectfully submitted pursuant to receipt of your request on April 22, 2005.  In accordance with NAC 360.200 (2), this opinion may be appealed to the Nevada Tax Commission.  Thank you for your inquiry.

Sincerely,

DEPARTMENT OF TAXATION

By: Signed
Charles E. Chinnock
Executive Director

Source:

State of Nevada, Department of Taxation, http://tax.state.nv.us

Copyright 2006 Peisner Johnson & Company, LLP. All rights reserved. Security, Legal & Privacy Policy.