The General Sales Tax Act; Exemption for “prosthetic device[s]”; MCL 205.54a(1)(k); MCL 205.51a(q); Effect of former MI Admin Code, R 205.139 (Rule 89); Concept that “taxation is the rule” & exemptions are the “exception”; Guardian Indus Corp v Department of Treasury; “Replacement, corrective, or supportive device”

Holding that “the prescription medical items at issue that plaintiff sold to disabled persons are not ‘prosthetic device[s]’ eligible for” the sales tax exemption in MCL 205.54a(1)(k), the court affirmed the Court of Claims order granting defendant partial summary disposition. After an audit, defendant determined “that plaintiff owed sales tax for sales of items generally categorized as prescription bandages, prescription incontinence devices/briefs, prescription medical gauze, prescription medical tape, prescription medical gloves, prescription wound dressing materials, prescription patient lubricants, prescription underpads, and prescription patient body wipes.” Plaintiff had treated those sales as exempt under MCL 205.54a(1)(k), MCL 205.51a(q), and former Rule 89. The court reviewed the statutes, including the definition of a prosthetic device (MCL 205.51a(q)), and Rule 89. It noted that the exemption statute, MCL 205.54a(1)(k), has been amended, and Rule 89 has been rescinded. While it technically remained in effect until 2023, “an administrative rule cannot broaden the scope of the statutory exemption.” Thus, the court focused on the statutory definition of a prosthetic device. “The statute’s plain language requires that a prosthetic device replace, correct, or support a specific body part.” It found critical “the statutory requirement that a prosthetic device must be a ‘replacement, corrective, or supportive device.’” Consulting a dictionary to define those terms, the court concluded that “a ‘prosthetic device,’ for purposes of the statute, is a piece of equipment or mechanism, designed to serve the special purpose or perform the special function of taking the place of a ‘missing portion of the body,’ altering or adjusting a ‘physical deformity or malfunction of the body’ to bring it to standard condition, or assisting in keeping a ‘weak or deformed portion of the body’ going.” It determined that the “device must do more than merely treat the symptoms of the condition; it must operate as a substitute or restore the affected body part to something approaching ordinary functionality.” And the court found that plaintiff failed to show that any of the items for which it claimed the exemption “were designed to accomplish any of” the statute’s listed purposes.