By: Jason B. Nichols
Devices used in diagnosis of an illness or disease are exempt from sales and use tax.
In Medical Diagnostic Services, Inc. v. Bridges, 09-0942 (La.App. 1 Cir. 12/30/09), not published, the plaintiff appealed the Louisiana Department of Revenue’s denial of its claim for a refund of sales and use tax. After a hearing, the Board of Tax Appeals ruled against the Louisiana Department of Revenue and ordered them to refund taxes plus interest on the purchases of X-ray film, reagents, medical laboratory kits and supplies, and other diagnostic devices. The Board found that these purchases were exempt from taxation under La. Rev. Stat. _47:305D(1)(j).
The Department of Revenue had ruled that tax refunds were not warranted on these devices because the statute only exempted drugs as prescribed by a physician or dentist. Specifically, La. Rev. Stat. 47:301(20) provides the definition of “drugs” as “includes all pharmaceuticals and medical devices which are prescribed for use in treatment of any medical disease.” The Department of Revenue determined that these types of diagnostic materials and devices are not used in the “treatment” of a disease. However, the Board of Tax Appeals disagreed, finding that diagnosis of an illness or disease, diagnostic work, testing, and test results are all a vital part of the “treatment” of a patient. Therefore, the Board of Tax Appeals determined that these items were exempt from taxes and refunds should be given.
The Department appealed, and the Louisiana First Circuit Court of Appeals agreed with the Board holding that the “diagnosis of an illness or disease, diagnostic work, testing and test results” are a vital part of the treatment of a patient. The court noted that an expert who testified that diagnostic work and testing are all a part of treatment was not contradicted by the Revenue Department. Additionally, all items that were exempt from taxes had been prescribed by a physician. Some of the items that were exempt from sales and use tax included: blood pressure cuffs, diabetic test strips, EKG electrodes, X-ray film, blood pressure prep kits, dressings, shoe covers, and latex gloves.
Hospital and physician websites could pose liability risks.
A recent Federal First Circuit Court of Appeals case sends a reminder to physicians and hospitals that they should take a close look at their websites and consider any liability risks that might be present. In Cossaboon v. Maine Medical Center, 600 F.3d 25 (1
st Cir. 2010), the plaintiff filed a medical malpractice suit against the hospital in federal court in New Hampshire claiming that general jurisdiction existed. However, the court held that the Maine health care facility’s website, which advertised its services and mentioned New Hampshire on four occasions, was not a continuous and systematic contact enough to create jurisdiction over the health care facility in New Hampshire. The court noted that since the “website is available to anyone with internet access and does not target New Hampshire residents in particular,” it did not have sufficient purposeful contact to sustain jurisdiction.
In reaching its decision, the court noted that a finding of general jurisdiction based on website activity involves a focus on the extent to which the defendant has actually and purposefully conducted commercial or other transactions with forum state residents through its website. Further, counsel for the hospital’s parent organization, noted that website content can present issues ranging from malpractice and copyright infringement to privacy and fraud. She also noted that hosts of websites should “carefully consider the nature of their websites’ content” and how it may expose them to liability.
1For more information, see BNA’s Health Law Reporter Vol. 19, No. 15, pp. 523-24.