As reported by Bobby Smith of Palmetto Medical (via fax) acting as a third party firm reviewing such claims....

Inclusion of sales taxes in reasonable charges..A sales tax on any service or item covered under the SMI program is a part of a Medicare beneficiary’s medical expense for which he is responsible and for which he may receive reimbursement of 80% of the reasonable charge after the deductible is met. Therefore, the total charge for a service or item including sales tax, is the current amount to use in the calculation of the customary charge. For example, if a physician charges $7 for covered office call and 28 cents sales tax, the total charge of 7.28 is the amount to use in the calculation of the customary charge for that service. However, if another physician in the same locality also charges $7 for a covered office call, but he does not make an additional charge for the sales tax, the $7 charge is the amount to use in the calculation of the customary charge for that service.

Since sales taxes, where appropriate, were included in the calculation of reasonable charges, they likewise were accounted for in the calculation of the base fee schedules for DME and orthotic/prosthetic devices as set out in par 5102. The Consumer Price Index used to update fee schedules also accounts for sales tax. Therefore, do not make any additional payment for sales taxes and do not make adjustments in fees to reflect local changes in tax rates.

Collector responds...Rufus Fruge, Calcasieu Parish...

Palmetto Medical is an agency that is under contract with the Medicare program for reviewing claims and issuing payments to qualified vendors and Medicare beneficiaries. I am currently in the process of contacting Mr. Smith for a copy of the manual or at least a clean copy of the page from which this information was obtained. Judging from the inscription noted at the bottom of the facsimile transmission, this information is derived from some type of Medicare Procedural Manual used by the agencies throughout the country who have occasion to accept and process the many Medicare claims.

Throughout the years, there has been much confusion and discussion over the Medicare program and the taxability of transactions that are ultimately paid by Medicare. Furthermore, Act 22 of the 2000 2^nd Extraordinary Session became law effective July 5, 2000, and grants a refund to any person who has paid state or local taxes in connection with transactions that come under or are reimbursed through the Medicare Program.

For the most part, we have customarily been told that transactions involving Medicare were simply non-taxable. Various vendors upon whom we have conducted examinations have staunchly held that such transactions are not only non-taxable, but they are prevented from charging anything above the reasonable charges allowed by Medicare, either through the program or under an assignment arrangement.

The significance of this information is that for the first time in 10 or more years, we have documented evidence that sales taxes are taken into consideration in the calculation by Medicare of reasonable charges. Although the illustration used in the procedure is a poor one, in my opinion, it nonetheless, illustrates how taxes are taken into consideration.

I must confess that this information has caused me to rethink the advice given to local vendors who have occasion to deal with Medicare beneficiaries. Historically, we have advised vendors to either back into the reasonable charges reported by Medicare and in recent years have altered that to signify that the reasonable charges constitute the taxable base upon which taxes are to be computed.

After a careful review of this information, it has become quite apparent that the initial procedure, backing into the taxable base, is the correct manner in which to arrive at the true taxable base.

Although I have given some thought to how this information will impact Act 22, I have not come to a full understanding of its implications in order to advise local vendors of the manner in which they should handle these transactions subsequent to July 5, 2000. I do plan to alert local vendors of this prescribed fashion in both computations associated with taxable transactions involved Medicare, as well as the pertinence of Act 22, if any, for their benefit.

It may be a good idea to hold off before making a final decision on this issue, until I get the official authority from which this information was taken. Only in that fashion can we validate the authenticity of its content for future reference purposes.

Court of Appeal affirms district court ruling that fees paid by taxpayer for patent rights to an anode coating process and subsequent use were subject to use tax.

The Court rejected the intangible argument and thus held the fees taxable. Although statute imposes a tax upon transactions involving tangible property, it has also been held that intangible rights, when closely connected to tangible personal property may also become taxable.

The Court found that the intangible component was so closely related that one would be useless without the other and therefore taxable. The anodes could not be leased without the accompanying technology and know how. The alleged technology was an inseparable part of the anodes (hardware) and for that reason must be included as part of the total price of the lease.

(Occidental Chem v Dept of Rev, 5^th Cir, Dkt 99-CA-963)

Court of Appeal recently ruled that the taxpayer is not subject to state income tax, or sales tax because it is a federally chartered instrument of the United States.

The Constitution prohibits states from taxing instrumentalities of the federal government, unless explicitly authorized by Congress.

The Court rejected the argument that Congress did not mention income tax as being

subject to PCAs when addressing other taxes concerning such organizations. The Court ruled that Congress’ designation of PCAs as federal instrumentalities automatically conferred immunity.

The Court further found that the waiver and not the immunity, must be explicit with respect to federal instrumentalities.

(NW Prod Credit v Dept, 1^st Cir, Dkt #98 CA-1995)

The Department of Revenue has adopted a rule providing for refund claims, or credits of overpayment of taxes.

The rule requires refund or credit claims to be submitted in writing or by a timely amended return. The request must contain a clear statement detailing the reason for the claim.

The claim must be approved, or denied, in accordance with Departmental policy and procedures relative to such.

In accordance with RS 47:1625 a denial can be appealed to the Board of Tax Appeals.

(LA Register, Volume 26, #1)

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Bossier Police Jury - rate increased from 3 to 3.25%. Total (state, parish & city) in Benton from 8 to 8.25%, Haughton from 8 to 8.25%, Plain Dealing from 7.5 to 7.75%. Bossier City remains unchanged @ 8%, other areas of Parish increased from 7 to 8.25%.

Lincoln Parish Schools - rate increased from 1.5 to 2.0%. Total (state, parish & city) in Dubach from 7.25 to 7.75%, Grambling from 8.25% to 8.75%, Ruston from 8 to 8.5%, other areas of Parish increased from 6.25 to 6.75%.

Sabine Parish Tax District - added 0.5%..Total (state, parish & city) in Many from 7.5 to 8.0%, Converse, Florien, Pleasant Hill & Zwolle remain unchanged, other areas of Parish remain unchanged.

Pointe Coupee Schools - rate increased from 1 to 2%. Total (state, parish & city) in Fordoche, Livonia, Morganza & New Roads increase from 7.75 to 8.75%, other areas of Parish increase from 6.75 to 7.75%.

Town of Walker (Livingston) increased its rate from 1.5 to 2.0%. Total state, parish, city & other increases from 9 - 9.5%.

(Dept of Public Safety)

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In this action for a refund of taxes paid under protest, plaintiffs appeal a ruling dismissing their action as being untimely.

The Caddo Tax Commission audited taxpayer and issued standard assessment for same. In accordance with local ordinance, an aggrieved taxpayer is to pay assessment and notify collector of intent to file suit for recovery. The ordinance provides for a 30 day period in which to institute such action.

Successor company (noted as taxpayer #2), created by merger of original taxpayer (noted as taxpayer #1), paid assessment under protest and filed for recovery. Following such action, taxpayer #2 amended petition adding the name of the original taxpayer (#1) as an additional party.

The supplemental and amended petition was filed to add, as a petitioner, taxpayer #1. The supplemental petition stated that it was necessitated by a misunderstanding of the complex series of transactions that ultimately resulted in the acquisition of taxpayer #1 by taxpayer #2.

The Commission Administrator filed a peremptory and dilatory exceptions asserting, that taxpayer #2 had no right of action to secure such refund which it paid for taxpayer #1. Foundation for exceptions indicated that taxpayer #1 did not become a party to the request until after the expiration of the 30 day provisions of the ordinance.

Upon hearing, the trail court granted the exceptions and dismissed the action, finding that the ordinance is peremptive, rather than prescriptive, and the amending petition was untimely as it was not filed within the 30 day period set forth. This decision was appealed by the plaintiffs.

The new plaintiff, taxpayer #1, is a wholly owned subsidiary of the original plaintiff, taxpayer #2. Additionally, taxpayer #2 paid the taxes under protest on behalf of taxpayer #1, and instituted the instant action for return of the amounts paid under protest.The funds paid under protest are in escrow pending resolution of this litigation and will either be refunded to the plaintiffs or released to the local authorities once the matter is settled.

The Court found that the trail court erred in dismissing plaintiffs’ action. It found that taxpayer #2 filed within 30 days as required by ordinance. It also found that the trial court erred in not allowing taxpayer #1's amended petition to relate back to the date of filing of the original petition, regardless of whether the time period set forth in the ordinance is one of peremption or prescription. For those reasons, the trail court reversed the matter and remanded it for further proceedings consistent with the Court’s finding.

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This is an interesting case and should be reviewed in its entirety. It also involves two of our own!

(Houston Industries v Fitch, Caddo Parish Tax Comm, 2^nd CA #32654)

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My teenager has been trying to run
          away for a year, but every time he
                         gets to the front door, the phone rings...