State senators voted unanimously Thursday to give a tax break to women who choose to install what one lawmaker calls “non-original equipment.’’
SB 1143 blocks the state Department of Revenue from levying the state’s 5.6 percent sales tax on “prosthetic devices prescribed or recommended by a health professional.’’
Some of that is designed to clarify that an existing exemption for things like artificial limbs also extends to things like “lap bands’’ which are placed around the stomach of people who are obese. The Department of Revenue has concluded these are taxable.
But Becky Hill, who lobbies for Allergan, an international company that produces medical devices, said a major purpose behind the legislation is to force the state to stop taxing breast implants.
The Department of Revenue has concluded that implants are not taxable only if they are used for reconstruction after surgery or to “repair congenitally unformed breasts.’’ Other uses, including reforming the shape of the breasts or augmenting their size, is subject to the tax.
That distinction annoyed Sen. Pamela Gorman, R-Anthem.
“We’re just trying to say, ‘Listen: If you have surgery and they have to put anything in your body that wasn’t original to when you were born, it doesn’t make it a product,’’’ Gorman said.
“It’s still a service,’’ she continued. “And we’re just trying to clarify that.’’
Hill said there are a couple of problems with the state’s current approach.
First, she said, there can be “gray area’’ of what work is reconstructive and what is purely cosmetic when a woman has a “breast malformity.’’
“Who’s making the decision?’’ she said. Hill said that should be decided by doctors.
More problematic, Hill said, is what happens when the Department of Revenue raises questions about when the tax isn’t paid. And the only way to figure out if the implants should be taxable would be to audit a doctor’s files -- and, potentially, each patient’s files.
She said federal law contains very rigid restrictions about when medical personnel can share patient information with outsiders. For example, Hill said, patient records can be opened in matters of “homeland security’’ or where there is a question of insurance fraud.
“It’s not to collect a retail tax at the state level,’’ she said.
If nothing else, Hill said the legislation ensures that those patients who already are entitled to tax-free implants do not have their files audited by some state tax official trying to ferret out the cases where the implants are purely for vanity.
Gorman said the legislation makes sense because what patients are buying is medical care.
“Surgery is a service,’’ she said, which is not taxable. “The fact that they use thread doesn’t make it less so.’’
She also said the Legislature needs to intervene because the Department of Revenue has been under pressure to find more revenues. But she said the agency is going to far, “``trying to dig in and find taxes where they don’t exist.’’
How many surgeries the change would affect is not clear, as Allergan was unable to provide either cost figures for implants or the number of procedures here. But Hill said she figured that SB 1143 would reduce state revenues by somewhere between $300,000 and $400,000 a year.
There was no testimony against the bill.