Michigan Sales Tax Exemption for Prosthetic Devices

The Michigan sales tax exemption for prosthetic devices has been expanded by the Michigan Department of Treasury’s response to Agile Consulting Group’s recent ruling request. The Tax Professionals at Agile Consulting Group, a proud member of the Michigan Ambulatory Surgery Association (MASA), received updated written guidance from the Michigan Department of Treasury’s Tax Policy group regarding the Michigan sales tax exemption for prosthetic devices. From Agile’s recent experience at the MASA 2023 Education Day and subsequent interactions with its members, most Michigan Freestanding Surgical Outpatient Facilities, licensed under Part 208 of Michigan’s Public Health Code, and Hospitals, are aware of the law

Michigan Prosthetic Device Exemption – Updated from Tax Policy Guidance

The law change that expanded the Michigan sales tax exemption for prosthetic devices in Mich. Comp. Laws Ann. Sec. 205.54ff, specifically for hospitals and freestanding outpatient surgical facilities, eliminated the “dispensed pursuant to a prescription” requirement. An implantable prosthetic device will be exempt from Michigan sales tax if the prosthetic device is purchased by a hospital or a freestanding surgical outpatient facility and is a replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, and does one or more of the following:

• Artificially replace a missing portion of the body.
• Prevent of correct a physical deformity or malfunction of the body.
• Support a weak or deformed portion of the body.

The law change has been well-received by Michigan hospitals and freestanding outpatient surgical facilities and most of the qualifying facilities understand that the exemption will cover implants permanently implanted into a patient, such as:

• Artificial knees, hips and shoulders
• Pacemakers
• Intra-Ocular Lenses (IOLs)
• Stents
• Bone pins, screws & nails

However, the law change in Mich. Comp. Laws Ann. Sec. 205.54ff contained some ambiguity regarding the duration of time that the implanted prosthetic device must remain in the body for the Michigan sales tax exemption for prosthetic devices to apply. In addition to the exempt items previously listed, the Tax Policy group at the Michigan Department of Treasury provided Agile Consulting Group with Written Guidance that confirmed the following items will also qualify for exemption if purchased by a hospital or freestanding surgical outpatient facility:

• Endotracheal tubes
• Foley catheters
• Intravenous catheters (e.g., PICC lines)
• Surgical mesh
• Sutures (both absorbable and non-absorbable)

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 prosthetic devices, as provided in Michigan Comp. Laws Ann. Sec. 205.54ff, can request a refund up to four years from 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
• 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 recovering overpaid sales taxes from the Michigan Department of Treasury and can assist any Michigan hospital or freestanding outpatient facility with this cumbersome process.

Contact Agile Consulting Group with Your Questions

If you have any questions, comments or want 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 888-350-4839 or via email at info@salesandusetax.com.