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Carealliance Health Services v. South Carolina Department of Revenue

Supreme Court of South Carolina

April 20, 2016

CareAlliance Health Services d/b/a Roper St. Francis Healthcare, Respondent,
v.
South Carolina Department of Revenue, Appellant. Appellate Case No. 2014-001457

Heard February 9, 2016.

Appeal from the Administrative Law Court The Honorable Shirley C. Robinson, Administrative Law Judge

Milton G. Kimpson and Lauren Acquaviva, both of the South Carolina Department of Revenue, of Columbia, for Appellant.

John C. Von Lehe, Jr. and Bryson M. Geer, both of Nelson Mullins Riley & Scarborough, LLP, of Charleston, and Raymond P. Carpenter, of Roswell, Georgia, for Respondent.

HEARN, JUSTICE.

The South Carolina Department of Revenue (DOR) appeals the Administrative Law Court's (ALC) grant of summary judgment in favor of CareAlliance Health Services (the Hospital) finding (1) orthopaedic prosthetic devices purchased for specific patients are exempt from sales tax and (2) other bone, muscle, and tissue implants replaced a missing part of the body. We reverse.

FACTUAL/PROCEDURAL HISTORY

The Hospital is a health corporation comprised of Roper Hospital and St. Francis Hospital in Charleston, which render customary surgical and emergency services to patients. The Hospital provides orthopaedic prosthetic devices[1] and other implants to patients through either a planned surgical procedure or in response to trauma.

Generally during a scheduled surgery, a prosthetic device vendor is present in the operating room with a portfolio of prosthetic devices from which a surgeon can select the appropriate implant. Upon determining the appropriate device, the surgeon communicates his selection to the vendor. The vendor then provides the chosen device to a circulating nurse for implantation by the surgeon. Subsequently, the vendor fills out a requisition sheet, in which a record of the device is memorialized. The requisition sheet is initialed by the circulating nurse as an acknowledgement the items were consumed. The form is then provided to the Hospital's purchasing department, and a purchase order is generated and submitted to the vendor based on prearranged pricing agreements with the Hospital.

Believing the purchase of orthopaedic prosthetic devices and other implants were eligible for a sales tax exemption, the Hospital sought a refund from DOR.[2]Specifically, the Hospital asserted under Home Medical Systems, Inc. v. South Carolina Department of Revenue, 382 S.C. 556, 564, 677 S.E.2d 582, 587 (2009), the prosthetic devices were "sold by prescription" as required for the tax exemption under section 12-36-2120(28) of the South Carolina Code (2014). Pursuant to Home Medical, a device is sold by prescription if (1) the sale requires a prescription; (2) the device is actually sold by prescription; and (3) the device replaces a missing part of the body. 382 S.C. at 564, 677 S.E.2d at 587.

Following an audit, DOR denied the request as to orthopaedic prosthetic devices on the grounds they do not require a prescription to be sold and a prescription was not used in the purchase of the devices.[3] DOR also held other bone, muscle, and tissue implants were not exempt because they did not replace a missing part of the body, as required for the exemption.

The Hospital filed for a contested case hearing. After discovery, both parties filed motions for summary judgment. Following a hearing on the motions, the ALC granted summary judgment in favor of the Hospital, finding orthopaedic prosthetic devices qualified for the exemption and other bone, muscle, and tissue implants replaced a missing part of the body.

DOR filed a motion for reconsideration, which was denied, and thereafter filed a notice of appeal. This Court certified the case for ...


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