Binsons_MTT_EFiling_Packet_with_Order_DRAFT.pdf
Binson's Hospital Supplies, Inc. Petitioner Vs. Michigan Department Of Treasury Respondent · 26-001081-TT
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STATE OF MICHIGAN GRETCHEN WHITMER GOVERNOR DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS LANSING ORLENE HAWKS DIRECTOR MICHIGAN OFFICE OF ADMINISTRATIVE HEARINGS AND RULES MICHIGAN TAX TRIBUNAL · 611 W. OTTAWA ST., LANSING, MI 48933 · 517-335-9760 PO BOX 30232, LANSING, MI 48909 · Other Carriers: 2407 N GRAND RIVER AVE, LANSING, MI 48906 ______________________, MICHIGAN TAX TRIBUNAL Petitioner, v MOAHR Docket No. ___________ ______________________, Respondent. ENTIRE TRIBUNAL NON-PROPERTY TAX PETITION 1. Assessment No: _____________________________________________ 2. The type of tax at issue is 3. This appeal involves issues relating to the (check all that are applicable): ________ Tax ________ Interest ________ Penalty ________ Refund of tax in the amount of $_____________ 4. The action that prompted this appeal is_____________________________________________________________ ______________________________________________________________ ____________________________________________________ 5. Petitioner’s legal residence or principal office address is: ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ____________________________________________________ Binson's Hospital Supplies Inc. To be assigned Michigan Department of Treasury 1506997, 1507001, 1759632, 1759637, 1507021/1509021 Michigan sales tax - audit period 07/01/2020 through 12/31/2023 X X X Treasury Decision and Order dated March 20, 2026, Docket No. 2025-1111, upholding Intents to Assess as adjusted. 26834 Lawrence Avenue Center Line, MI 48015
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MOAHR Docket No. _______________ Page 2 of 3 6. The amounts as assessed are: Tax Interest Penalties 7. Petitioner contends that the assessment should be as follows: Tax Interest Penalties 8. The values in dispute are: Tax Interest Penalties 9. Petitioner requests the following relief (attach additional page if necessary):_______________________________________________________ ________________________________________________________________ ________________________________________________________________ ____________________________________________________ 10. List the separate and specific facts upon which Petitioner relies to support the relief requested (attach additional page if necessary): ________________________________________________________________ ________________________________________________________________ _______________________________________________________ Signature of Petitioner’s Authorized Representative or, if none, Petitioner: __________________________________________________________________ Email Address: ___________________________________________________ Mailing Address: ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ _________________________________________________ To be assigned $547,570.09 All assessed/accruing Any assessed $0.00 on contested items $0.00 $0.00 $547,570.09 All assessed/accruing Any assessed Cancel, vacate, or reduce the Decision and Order and Intents to Assess; refund/credit amounts paid; abate interest and penalties; grant other just relief. See Attachment A - Statement of Specific Facts and Grounds for Relief. /s/ Brandon Fasse, Attorney for Petitioner brandon@fasselaw.com Fasse Law PLLC Brandon Fasse 25790 Commerce Dr, Ste 110 Madison Heights, MI 48071
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MOAHR Docket No. _______________ Page 3 of 3 Telephone Number: __________________________________________________ Date: ______________________________________________________________ To be assigned [insert telephone number] May 13, 2026
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STATE OF MICHIGAN
MICHIGAN TAX TRIBUNAL
BINSON'S HOSPITAL SUPPLIES INC.,
Petitioner,
v
MICHIGAN DEPARTMENT OF TREASURY,
Respondent.
MOAHR Docket No. To be assigned
Treasury Docket No. 2025-1111
Tax: Michigan Sales Tax
Audit Period: 07/01/2020 - 12/31/2023
ATTACHMENT A TO ENTIRE TRIBUNAL NON-PROPERTY TAX PETITION
Statement of Specific Facts and Grounds for Relief
I. APPEALED DECISION AND AMOUNTS IN DISPUTE
1. Petitioner, Binson's Hospital Supplies Inc. ('Binson's'), appeals under MCL 205.22 from the
Michigan Department of Treasury Decision and Order of Determination dated March 20, 2026,
Treasury Docket No. 2025-1111.
2. The Decision and Order concerns Michigan sales tax for the audit period July 1, 2020 through
December 31, 2023. The Department's order and recommendation reference Intents to Assess
and/or reissued Intents to Assess including, without limitation, 1506997, 1507001, 1507011,
1507021, 1509021, 1759623/1759632, and 1759637. Binson's contests all adjusted assessments,
interest, and any penalty arising from the Decision and Order, except for any amount later expressly
admitted in writing.
3. The Decision and Order upheld or recommended adjusted tax of $82,608.63 for 2020,
$164,938.92 for 2021, $152,631.00 for 2022, and $147,391.54 for 2023, for total contested tax of
$547,570.09, plus statutory interest and any penalty that has been or may be asserted.
4. Binson's requests that the Tribunal cancel, vacate, or reduce the Decision and Order and resulting
assessments; determine that the disputed product categories are exempt or otherwise not taxable;
order refund or credit of amounts paid; abate all penalties and interest to the maximum extent
permitted by law; and grant all other relief that is just and equitable.
II. FACTUAL BACKGROUND
5. Binson's is a medical equipment and medical supply retailer and lessor. The Department's
informal conference recommendation describes Binson's as operating locations in Michigan,
Indiana, and Florida, with a showroom and rehabilitation facility in Michigan, and as employing
medical professionals, including an orthotist and a rehabilitation technician.Page 5
6. The dispute is not about recreational, cosmetic, or discretionary consumer goods. The products at issue are medical supplies and systems used by patients with illness, injury, disability, post-surgical conditions, incontinence, wounds, ostomies, urinary dysfunction, mobility impairments, or other chronic medical needs. 7. The Department characterized the dispute broadly as the taxability of supplies used for incontinence and wound care. Binson's contends that this characterization is overbroad and materially incomplete. The actual transactions must be reviewed by product category, SKU, prescription/order status, patient use, payer treatment, HCPCS or other billing classification, manufacturer instructions, and the relationship of the product to durable medical equipment, prosthetic devices, mobility enhancing equipment, or repair/replacement parts and accessories. 8. The product categories include, among others, incontinence management products and systems; advanced wound dressings and post-surgical supplies; ostomy appliances and related supplies; catheters and catheter-related supplies; and other components, attachments, replacement parts, or supplies used with exempt medical equipment or prosthetic devices. Binson's reserves the right to supplement this list after production of the audit file and item-level schedules. III. STATUTORY GROUNDS FOR EXEMPTION 9. MCL 205.54a(1)(k) exempts the sale of a prosthetic device, durable medical equipment, or mobility enhancing equipment. Binson's relies on each of these statutory exemptions, and pleads them in the alternative and cumulatively. 10. A 'prosthetic device' includes a replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device, worn on or in the body to artificially replace a missing portion of the body, prevent or correct a physical deformity or malfunction of the body, or support a weak or deformed portion of the body. MCL 205.51a(q). 11. 'Durable medical equipment' includes equipment for home use, other than mobility enhancing equipment, dispensed pursuant to a prescription, including durable medical equipment repair or replacement parts, that can withstand repeated use, is primarily and customarily used to serve a medical purpose, is not useful generally to a person in the absence of illness or injury, and is not worn in or on the body. MCL 205.51a(j). Durable medical equipment repair or replacement parts include all components or attachments used in conjunction with durable medical equipment. MCL 205.51a(k). 12. 'Mobility enhancing equipment' includes equipment, other than durable medical equipment or a motor vehicle/equipment normally provided by a motor vehicle manufacturer, dispensed pursuant to a prescription, including repair or replacement parts for that equipment, that is primarily and customarily used to provide or increase the ability to move from one place to another and is not generally used by a person with normal mobility. MCL 205.51a(n). 13. The Department's analysis treats single-use status, consumability, and the labels 'wound care' or 'incontinence' as categorically disqualifying. That approach reads important statutory words out of
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the Act, including 'repair or replacement parts,' 'components,' 'attachments,' 'supportive device,' 'prevent or correct ... malfunction,' and 'support a weak or deformed portion of the body.' The Tribunal should reject any categorical rule and instead decide the statutory status of the transactions product by product. IV. PRODUCT-CATEGORY THEORY 14. Ostomy appliances and related supplies. Ostomy bags and stoma-related appliances function as prosthetic devices because they replace, support, or correct the function of an internal body organ or surgically altered body system. They are worn on or in the body, are medical in purpose, and are not useful in the absence of illness, injury, deformity, or surgery. To the extent the Department taxed ostomy appliances, bags, barriers, wafers, seals, pouches, or related components, those transactions should be removed from the audit base. 15. Catheters and urinary-management systems. Catheters and related components are worn in or on the body and are used to manage, support, prevent, or correct urinary malfunction. Depending on the item and transaction, they qualify as prosthetic devices, repair or replacement parts, components or attachments used with durable medical equipment, or medically necessary supplies connected to an exempt device or system. 16. Incontinence control devices and systems. The Department cannot treat all incontinence products as ordinary apparel or hygiene goods. A medical incontinence control device or system used for a patient with bladder or bowel dysfunction is designed to manage bodily malfunction, protect the patient's skin and surrounding tissue from breakdown and infection, permit mobility and daily functioning, and support a body system that no longer functions normally. When worn on or in the body and dispensed pursuant to prescription or medical order, the item falls within the statutory language or, at minimum, requires product-specific proof rather than categorical denial. 17. Advanced wound-care and post-surgical products. The Department's recommendation appears to analogize the disputed items to over-the-counter gauze, tape, bandages, and body wipes. Binson's will show that many disputed wound-care products are not generic OTC goods. Advanced dressings, barriers, negative-pressure wound therapy components, post-surgical pads, pressure-relief components, and similar products may replace or support the function of compromised skin, prevent infection, support weak or deformed tissue, and serve as components or attachments to covered medical systems. Their taxability must be decided by evidence, not labels. 18. Durable medical equipment components and accessories. For DME, the repeated-use requirement applies to the equipment. The separate statutory phrase covering 'repair or replacement parts' and 'all components or attachments used in conjunction with durable medical equipment' prevents the Department from denying exemption merely because a necessary component, attachment, supply, or replacement part is disposable or single-patient use. A contrary reading would make the component-and-attachment language meaningless. 19. Mobility-enhancing equipment and parts. Products that increase a patient’s ability to move from place to place, are appropriate for home or vehicle use, and are not generally used by persons with normal mobility fall within the mobility-enhancing equipment exemption. Parts, attachments, and
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replacement items for such equipment are included. Binson's preserves this theory for all item-level transactions supported by the audit record. V. REHAB & MOBILITY SYSTEMS IS DISTINGUISHABLE 20. The Department relied on Rehab & Mobility Systems, LLC v Michigan Department of Treasury, Court of Claims Case No. 23-000012-MT. That decision does not end this case. It involved a different taxpayer, a different record, different pleadings, and different item-level evidence. 21. The Court of Claims described the products in Rehab & Mobility as over-the-counter bandages, incontinence briefs, gauze, medical tape, medical gloves, wound dressing materials, personal lubricants, under pads, and body wipes. The court's analysis was directed to whether those products, as presented in that record, qualified as prosthetic devices under MCL 205.51a(q). 22. Critically, the Rehab & Mobility opinion stated that the plaintiff had not alleged in its complaint that any of the items at issue were eligible for exemption as durable medical equipment or mobility enhancing equipment. Binson's expressly does plead DME, DME repair/replacement parts, components or attachments, mobility enhancing equipment, and prosthetic-device theories. 23. Binson's also does not rely on former Rule 89 as an independent exemption that overrides the statute. Instead, Binson's relies on the current statutory text. Former Rule 89, the Department's prior administrative materials, and industry practice remain relevant to reasonable cause, good faith, penalty abatement, and the reasonableness of product-specific classifications. 24. The Tribunal should therefore reject any attempt to convert Rehab & Mobility into a categorical rule that all incontinence, wound-care, catheter, ostomy, or single-patient medical supply transactions are taxable. The correct question is whether each transaction fits the words enacted by the Legislature. VI. MINNESOTA/STREAMLINED-SALES-TAX INTERPRETATION 25. Binson's preserves and relies on the Minnesota interpretation raised in the Rehab & Mobility appeal and similar Streamlined Sales and Use Tax Agreement materials as persuasive authority. Michigan's 2004 statutory changes were part of the Streamlined Sales Tax project, whose purpose was to create greater uniformity in sales and use tax statutes and administration among member states. A sister member state's interpretation of the same or materially similar medical-exemption terms is therefore relevant to the reasonableness of Binson's interpretation and to the rejection of Treasury's narrow categorical approach. 26. Minnesota's statute uses the same basic categories: prosthetic devices, durable medical equipment for home use, and mobility enhancing equipment. Minnesota expressly provides that DME repair and replacement parts include components or attachments used in conjunction with DME, including single-patient-use items. Minnesota also exempts accessories and supplies required for the effective use of DME for home use or purchased in a Medicare or Medicaid transaction, and accessories and supplies for the effective use of a prosthetic device.
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27. Minnesota's Department of Revenue guidance further recognizes that prosthetic-device repair and replacement parts include disposable or single-patient-use items; lists catheters and gauze wraps among exempt prosthetic repair and replacement parts; treats incontinence control devices as prosthetic devices if worn in or on the body; and defines 'worn in or on the body' to include items carried by the body that do not hinder mobility. 28. Binson's does not contend that Minnesota law controls Michigan. Rather, Minnesota's interpretation demonstrates that Treasury's construction is not the only reasonable construction, that single-patient-use items are not automatically outside the medical-device exemptions, and that 'worn in or on the body,' 'component,' 'attachment,' 'support,' and 'malfunction' can reasonably include products used by disabled and chronically ill patients to manage incontinence, wounds, ostomies, urinary dysfunction, and other bodily malfunctions. 29. At a minimum, the Minnesota/Streamlined interpretation confirms that the statutory terms are not so clear as to support penalty treatment, a categorical audit adjustment, or summary disposition without item-level evidence. VII. BURDEN ON MEDICARE AND MEDICAID BENEFICIARIES 30. The Department's interpretation creates a direct and substantial burden on Medicare and Medicaid beneficiaries. Many of the disputed products are supplied to elderly, disabled, low- income, post-surgical, chronically ill, or mobility-impaired patients who receive medical equipment and supplies through Medicare, Medicaid, Medicare Advantage, Medicaid managed care, or other third-party medical coverage. 31. Suppliers who accept Medicare assignment generally agree to accept the Medicare-approved amount as the basis for payment and to limit charges to the beneficiary to deductible and coinsurance amounts. Medicaid providers likewise generally accept the Medicaid agency payment plus any required cost sharing as payment in full. When Michigan imposes sales tax on medically necessary covered supplies that are priced and reimbursed under federal or state health programs, the tax is not a normal retail cost that can freely be passed through to the consumer. 32. The practical result is that the tax either reduces supplier reimbursement for medically necessary supplies, increases beneficiary cost where lawful, or makes it harder for suppliers to continue serving high-need Medicare and Medicaid populations. The burden falls on the very persons the medical-device exemptions are designed to protect: patients whose bodies do not function normally and who need prescribed equipment, appliances, components, and supplies to live safely at home. 33. This access-to-care burden is relevant to statutory interpretation because, where the Legislature used medical-exemption terms that reasonably include the disputed items, the Tribunal should choose the interpretation that gives effect to the medical purpose of the exemption and avoids an unnecessary tax barrier to prescribed care. The burden is also independently relevant to good faith, reasonable cause, and penalty abatement. VIII. AUDIT, CALCULATION, AND PROCEDURAL ISSUES PRESERVED
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34. Binson's contests the Department's factual classification of the disputed products, the inclusion of exempt or nontaxable transactions in the audit base, the sample design, any projection or extrapolation methodology, the treatment of prescriptions and payer documentation, the treatment of resale or exemption documentation, the treatment of canceled and reissued Intents to Assess, credits and payments, and all interest and penalty calculations. 35. Binson's will seek discovery of the complete audit file, workpapers, item-level schedules, auditor notes, exemption-denial codes, sample population, projection methodology, internal guidance, other deduction manual provisions, communications concerning product classifications, and all materials relied upon by the Department in applying Rehab & Mobility or other authority. 36. Binson's will also produce and rely on product descriptions, manufacturer instructions for use, prescription/order documentation, medical-necessity documentation, payer records, HCPCS and billing classifications, Medicare/Medicaid coverage materials, customer category data, expert testimony, and representative transaction documents. IX. PENALTIES AND INTEREST 37. If any tax is sustained, all penalties should be abated. Binson's acted in good faith and with reasonable cause based on the medical character of the products, patient and payer documentation, the Department's historical administrative treatment of medical appliances and supplies, the uncertainty reflected by Rehab & Mobility, and the persuasive Minnesota/Streamlined interpretation of the same medical-device categories. 38. Interest should be abated, reduced, recalculated, or otherwise adjusted to the extent permitted by law, including to correct any underlying tax error, timing error, credit/payment error, canceled/reissued-intent error, or Department-caused delay. X. RELIEF REQUESTED 39. Binson's requests that the Tribunal enter judgment in its favor and grant the following relief: • Cancel, vacate, or reduce the March 20, 2026 Decision and Order of Determination and all resulting assessments. • Determine that the disputed products, or applicable product categories, are exempt as prosthetic devices, durable medical equipment, mobility enhancing equipment, repair or replacement parts, components, attachments, accessories, or otherwise nontaxable transactions. • Remove all exempt or nontaxable transactions from the audit base and order corrected schedules. • Refund or credit all amounts paid on assessments determined to be excessive, erroneous, or unlawfully collected. • Abate all penalties and reduce, recalculate, or abate interest to the maximum extent permitted by law. • Award such other relief as the Tribunal deems just and proper.
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Respectfully submitted, FASSE LAW PLLC /s/ Brandon Fasse Brandon Fasse Attorney for Petitioner 25790 Commerce Dr, Ste 110 Madison Heights, MI 48071 Email: brandon@fasselaw.com Dated: May 13, 2026
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EXHIBIT 1 Michigan Department of Treasury Decision and Order of Determination and Informal Conference Recommendation Dated March 20, 2026 Treasury Docket No. 2025-1111
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STATE OF MICHIGAN DEPARTMENT OF TREASURY DECISION AND ORDER OF DETERMINATION Binson'’s Hospital Supplies Inc Docket No. 2025-1111 Kevin Gerback Michigan Sales Tax 26834 Lawrence Avenue Intents to Assess 1506997, 1507001, Center Line, MI 48015 1759623, 1507011, 1759637 & 1509021 Audit Period: 07/01/2020 -12/31/2023 The Department, having reviewed the recommendation of the Referee i in the above captioned matter, and being advised in the premises; and It appearing that this recommendation is supported by authority and reasoned opinion, and that the same accordingly be accepted; It is ordered and determined that 2020 Intent to Assess 1506997 be upheld, as adjusted, for tax in the amount of $82,608.63 and interest. It is ordered and determined that 2021 Intent to Assess 1507001 be cancelled, and Intent to Assess 1759632 is upheld as adjusted for tax in the amount of $164,938.92 and interest. It is ordered and determined that 2022 Intent to Assess 1507011 be cancelled, and Intent to Assess 1759637 is upheld as adjusted for tax in the amount of $152,631.00 and interest. It is ordered and determined that 2023 Intent to Assess 1507021 be upheld, as adjusted, for tax in the amount of $147,391.54 and interest. It is further ordered and determined that the Department shall issue final assessments against you for the tax and interest remaining due after application of payments received. The tax due on these assessments will be subject to the accrual of additional interest as provided by sections 23 and 24 of 1941 PA 122, as amended. Any final assessments issued will provide your appeal rights with respect to those assessments. 00128433000001070200
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Docket No. 2025-1111 Page 2 of 2 If you disagree with all or part of this Decision and Order of Determination you may, as provided at MCL 205.22, appeal to the Michigan Tax Tribunal within 60 days of this Decision and Order of Determination, or to the Michigan Court of Claims at any of its District Offices, within 90 days of this Decision and Order of Determination. All undisputed amounts must be paid prior to appeal. Appeal instructions and contact information for the Michigan Tax Tribunal are available at www.mi.gov/taxtrib. Appeal instructions and contact information for the Court of Claims District Offices are available at www.courts.mi.gov/courts/court-of-claims. Regind/R. Blough, Admifristrator Hearings Division On Behalf of the State Treasurer DATED: MAR 20, 2026 cc: Fasse Law PLLC Brandon Fasse 25790 Commerce Dr, Ste 110 Madison Heights, MI 48071 CERTIFIED MAIL - RETURN RECEIPT REQUESTED
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STATE OF MICHIGAN DEPARTMENT OF TREASURY Binson’s Hospital Supplies Inc Docket No. 2025-1111 Kevin Gerback Michigan Sales Tax 26834 Lawrence Avenue Intents to Assess 1506997, 1507001, Center Line, MI 48015 1759623, 1507011, 1759637 & 1509021 Audit Period: 07/01/2020 -12/31/2023 __ INFORMAL CONFERENCE RECOMMENDATION oo An informal conference for this matter took place on October 13, 2025, as scheduled, after the September 29, 2025, informal conference was postponed at the request of Binson’s Hospital Supplies Inc (“Petitioner”). Kevin Gerback participated by video and Brandon Fasse participated by telephone on behalf of Petitioner. Steven Engel, Theresa Miller, and Allison Kelly participated by video on behalf of the Michigan Department of Treasury (“Department”). FACTS Petitioner is a medical equipment and supplies retailer, and a lessor of durable medical equipment (“DME”) and supplies with 16 locations in Michigan, Indiana, and Florida. Petitioner also has a warehouse and rehabilitation facility in Michigan and a warehouse in Florida. The Department audited Petitioner for the period July 1, 2020, through December 31, 2023, and determined there was a discrepancy. On April 21, 2025, the Department issued the following Intents to Assess: e 1506997 for the period ending December 31, 2020, for tax in the amount of $183,715.71 and interest e 1507001 for the period ending December 31, 2021, for tax in the amount of $361,171.92 and interest e 1507011 for the period ending December 31, 2022, for tax in the amount of $343,061.70 and interest e 1507021 for the period ending December 31, 2023, for tax in the amount of $336,602.38 and interest. On June 23, 2025, the Department received the following from Petitioner: a Request for Hearing/Informal Conference; a letter dated June 20, 2025; a POA; a Memorandum in Support of Informal Hearing; and a copy of each of the intents to Assess. 00128433000001070300
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Docket No. 2025-1111 Page 2 of 7 The issue in this matter is the taxability of supplies used for incontinence and wound care. In its Memorandum in Support of Informal Hearing, Petitioner referenced Michigan Department of Treasury Other Deductions Manual, February 2024, Chapter 10, pages 42 — 46, and requested that the Department do a more complete and accurate application of Michigan's exemption rules for DME, prosthetic and orthotic devices, and prescription-based sales then reconsider the intents. Petitioner argued that there are several internal inconsistencies and ambiguities in the Other Deductions Manual that contribute to confusion. Petitioner also argued many of its incontinence management systems, advanced wound dressings, post-surgical pads, and various other support items are DME as they are often prescribed by healthcare professionals for patients with documented medical conditions. They are not recreational or discretionary consumer goods; rather, they serve essential medical purposes in the treatment and ongoing management of chronic illnesses, post-operative recovery, or injury rehabilitation. These items are therefore not taxable. Petitioner also argued several products identified in the audit, such as ostomy appliances, catheters, and specialized bandages, may qualify as prosthetic or orthotic devices. The Department, on the other hand, argued that Petitioner's supplies used for incontinence and wound care are taxable as they do not meet the statutory exemption for DME or prosthetic device. Gauze, bandages, and wound dressings do not meet the definition of a prosthetic device because they were not designed for the special purposes described in Michigan statute. Similarly, the incontinence briefs, wipes, and under pads do not meet he definition of prosthetic device as they are not worn on or in the body of a disabled person, do not prevent or correct a physical deformity or malfunction of the body, or do not support a weak or deformed portion of the body. The Department also argued none of the items fit the definition of DME as DME is worn on the body. During the informal conference, Petitioner's POA reiterated the arguments presented in Petitioner's submission and added that catheters are also at issue. The items at issue in this matter are not available in retail stores and should not be taxed as they are DME and/or prosthetic devices. Wound care products and adult diapers are only worn because they are necessary, not for comfort, and Petitioner is not claiming the products increase a patient's mobility. During the informal conference, the Department indicated incontinence and wound care items are the only items at issue here. The Department argued the products are not DME and/or prosthetic devices as they do not support bodily function and do not serve mobility purposes; instead, they provide comfort. The sale of such items by prescription does not cause them to be non-taxable. A product is considered taxable unless it falls within a statutory exemption. To be considered DME, the product is required to be used repeatedly. The items at issue here are not used repeatedly; instead, they are single use items.
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Docket No. 2025-1111 Page 3 of 7 ANALYSIS AND CONCLUSION At issue is whether the Intents to Assess should be upheld. The Department is granted broad authority under Michigan’s Revenue Act, MCL 205.1 et seq., to examine the books, records, and papers of a taxpayer, and to audit the accounts of a person or any other records pertaining to a tax administered by the Department. MCL 205.21(1); MCL 205.3(a); 1979 AC, R 205.23(1). The sales tax is one of the taxes administered by the Department in accordance with the Revenue Act. MCL 205.59. The General Sales Tax Act, at MCL 205.52, imposes tax on retail sales of tangible personal property at the rate of 6% of the gross proceeds. It provides, in pertinent part: (1) [T)here is levied upon and there shall be collected from all persons engaged in the business of making sales at retail...an annual tax for the privilege of engaging in that business equal to 6% of the gross proceeds of the business, plus the penalty and interest if applicable as provided by law, less deductions allowed in this act. The Act, at MCL 205.542a(1), provides some exemptions from the tax, including the sale of a prosthetic device, DME, or mobility enhancing equipment: (1) Subject to subsection (2), the following are exempt from the tax under this act: kok (k) The sale of a prosthetic device, durable medical equipment, or mobility enhancing equipment. The Act, at MCL 205.51a(q), defines “prosthetic device”: (q) "Prosthetic device" means...a replacement, corrective, or supportive device... dispensed pursuant to a prescription, including repair or replacement parts for that device, worn on or in the body to do 1 or more of the following: (i) Artificially replace a missing portion of the body. (ii) Prevent or correct a physical deformity or malfunction of the body. (iii) Support a weak or deformed portion of the body. The exemption and definition of “prosthetic device” were discussed by the Michigan Court of Claims in Rehab & Mobility Systems LLC v Michigan Dep’t of Treasury, 23-000012-MT (2024), a case involving over-the-counter bandages, gauze, tape, and wound dressings and over-the- counter incontinence briefs, medical gloves, personal lubricants, under pads, and body wipes. oH] a3 00128433000001070400
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Docket No. 2025-1111 Page 4 of 7 Due to a lack of statutory definitions, the Court applied dictionary definitions for the terms “replacement device,” “prevent,” “correct,” “deformed,” “deformity,” “support,” “weak,” and “malfunction.” The Court ruled that the over-the-counter wound care products did not fall within the “prosthetic device” definition when applying these definitions. The Court reasoned that while the items together serve the function of covering injuries to protect against infection and aid in the healing process, the items are not devices designed for the special purposes described In the statute. The Court similarly concluded that under these definitions, the over-the-counter incontinence | products did not fall within the “prosthetic device” definition. The Court reasoned that although they may have certain medical uses such as infection prevention, these items are not worn on or in the body to prevent or correct a physical deformity or malfunction of the body o to support a weak or deformed portion of the body. The Court concluded that the sales of the - items at issue were not exempt from sales tax under MCL 205.54a(1)(k). In the matter at hand here, Petitioner referenced Michigan Department of Treasury Other | Deductions Manual, February 2024, Chapter 10, pages 42 — 46. That Manual was updated in! May 2025 and indicates, in pertinent part: Prosthetic Device Prosthetic device means a replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device, worn on or in the body to do one or more of the following: o Artificially replace a missing portion of the body © Prevent or correct a physical deformity or malfunction of the body © Support a weak or deformed portion of the body dk k Durable Medical Equipment Durable medical equipment means equipment for home use, other than mobility enhancing equipment, dispensed pursuant to a prescription, including repair or replacement parts for that equipment, that does all the following: o Can withstand repeated use o Is primarily and customarily used to serve a medical purpose
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Docket No. 2025-1111 Page 5 of 7 o Is not useful generally to a person in the absence of illness or injury ® |s not worn in or on the body Petitioner argued its supplies are not recreational or discretionary consumer goods; rather, they serve essential medical purposes in the treatment and ongoing management of chronic ilinesses, post-operative recovery, or injury rehabilitation. While that may be true, and while Petitioner's incontinence supplies may have certain medical uses such as infection prevention, they are not prosthetic devices as they are not devices, they are not worn on or in the body, and they do not do any of the following: (1) artificially replace a missing portion of the body; (2) prevent or correct a physical deformity or malfunction of the body; or (3) support a weak or deformed portion of the body. They do not meet the statutory requirements for tax exemption. Petitioner's incontinence supplies are not DME as they do not withstand repeated: use (they are not durable) and they are not worn in or on the body. They do not meet the statutory requirements for tax exemption. Petitioner argued its supplies are not recreational or discretionary consumer goods; rather, they serve essential medical purposes in the treatment and ongoing management of chronic illnesses, post-operative recovery, or injury rehabilitation. While that may be true and while Petitioner's wound care supplies serve the function of covering injuries to protect against infection and aid in the healing process, they are not prosthetic devices as they are not devices, and they do not do any of the following: (1) artificially replace a missing portion of the body; (2) prevent or correct a physical deformity or malfunction of the body; or (3) support a weak or deformed portion of the body. They do not meet the statutory requirements for tax exemption. Petitioner's wound care supplies are not DME as they do not withstand repeated use (they are not durable) and they are worn in or on the body. They do not meet the statutory requirements for tax exemption. The Act, at MCL 205.68(4), provides that sales tax assessments are considered prima facie correct and the burden of proof of refuting the assessment is upon the taxpayer. It provides, in pertinent part: “If... the [D]epartment has reason to believe that. . . additional taxes are due, the [D]epartment may assess the amount of the tax due from the taxpayer based on ... any information that is available . . . to the [D]epartment. That assessment is considered prima facie correct for the purpose of this act and the burden of proof of refuting the assessment is upon the taxpayer. The intents issued by the Department in this matter are considered prima facie correct and the burden of proof of refuting them was upon Petitioner. 00128433000001070500
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Docket No. 2025-1111 Page 6 of 7 Proof by a preponderance of the evidence applies to proceedings before an administrative agency. Blue Cross & Blue Shield of Mich v Milliken, 422 Mich 1, 89; 367 Nw2d 1 (1985); Aquilina v Gen Motors Corp, 403 Mich 206, 210-11; 267 NW2d 923 (1978). This standard requires that the fact-finder believe that the evidence supporting the existence of the contested fact outweighs the evidence supporting its nonexistence. Blue Cross & Blue Shield, 422 Mich at 89. The burden of proof in this matter was on Petitioner and Petitioner did not meet that burden. The burden of proving entitlement to an exemption from taxation rests with the exemption claimant. Stege v Dep’t of Treasury, 252 Mich App 183, 189; 651 NW2d 164 (2002). However, an exemption claimant need only prove such entitlement to an existing exemption by a preponderance of the evidence. ProMed Healthcare v City of Kalamazoo, 249 Mich App 490, | 492;-644 NW2d 47 (2002). The preponderance of the evidence standard requires the party with 2 the burden of proof to convince the trier of fact that the matter asserted is more likely than not to be true. Petitioner did not meet that burden here. During the pendency of the informal conference it was discovered that a timely request for reconsideration had been received by the Department, but not properly accounted for. The Department approved the request for reconsideration making adjustments to reduce the liability for each of the tax periods at issue. While processing the reduced liability for 2021 and 2022, the Department cancelled 2021 Intent to Assess 1507001 on or about August 5, 2025, and issued a new Intent to Assess for the reduced liability on Intent to Assess 1759632. Similarly, the Department cancelled 2022 Intent to Assess 1507011 on or about August 12, 2025, and issued a new Intent to Assess for the reduced liability on Intent to Assess 1759637. The liability is the same liability that was appealed and discussed during the informal conference. As such, the newly issued Intents to Assess are included in this docket to afford the taxpayer continuing appeal rights on the liability. For the tax periods 2020 and 2023, the Department properly adjusted the 2020 Intent to Assess 1506997 after an approved RFR to tax in the amount of $82,608.63 and interest. The Department properly adjusted the 2023 Intent to Assess 1507021 after an approved RFR to tax in the amount of $147,391.54 and interest. Those Intents should be upheld, as adjusted. RECOMMENDATION It is recommended that 2020 Intent to Assess 1506997 be upheld, as adjusted, for tax in the amount of $82,608.63 and interest. It is further recommended that 2021 Intent to Assess 1507001 be cancelled, and Intent to Assess 1759632 is upheld as adjusted for tax in the amount of $164,938.92 and interest.
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Docket No. 2025-1111 Page 7 of 7 It is further recommended that 2022 Intent to Assess 1507011 be cancelled, and Intent to Assess 1759637 is upheld as adjusted for tax in the amount of $152,631.00 and interest. It is further recommended that 2023 Intent to Assess 1507021 be upheld, as adjusted, for tax in the amount of $147,391.54 and interest. Respectfully submitted, Kimberly B. Burzych, Referee Hearings Division 00128433000001070600