3 July 2002 GST/HST Ruling 35009 - Application of the GST/HST to Incontinence Products

Dear XXXXX

Thank you for your letter of XXXXX, and subsequent letter received on XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to importations of certain products by XXXXX[.]

I regret the delay in responding due to consultations on this matter.

Statement of Facts

From the information provided, and from discussions with you and with XXXXX, our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1) XXXXX imports certain XXXXX products from XXXXX, a manufacturer in XXXXX in the course of providing GST/HST exempt physiotherapy services to patients suffering from incontinence. These patients are referred to XXXXX for treatment by their physicians.

2) The XXXXX products are promoted by the manufacturer as products designed to help individuals regain function of pelvic floor muscles through sensory awareness in order to deal with stress incontinence, urge incontinence and mixed incontinence. They are sold only to health care practitioners in XXXXX. In Canada, individuals may purchase or rent these products on their own.

3) XXXXX imports the following XXXXX products from XXXXX for use in treating individuals with incontinence:

(a) EMG (EMG is an abbreviation of "electromyography". Electromyography is the measurement and study of the intrinsic electrical properties of skeletal muscles.)/Stimulation Sensors (rectal and vaginal probes).

These are internal probes that have been designed and manufactured for insertion in the body to track and stimulate function of certain pelvic floor muscles in the treatment of incontinence. XXXXX[.]

b) EMG/Stimulation Surface Sensors

These are external sensors placed on the outside of the body to track and stimulate muscle function. XXXXX.

(c) EMG Biofeedback Machines

These machines work in conjunction with the EMG Stimulation Sensors. They have female ports that accept male connections on the internal or surface sensors. The machines provide audio or visual feedback to the individual to ensure that he or she is performing pelvic floor muscle exercises correctly and consistently. A record of the exercise sessions performed is kept so that the health care practitioner monitoring the therapy can later evaluate the home training exercises.

Biofeedback machines come in hand held home trainer models while other machines provided for at-home exercises connect to laptop or personal computers.

(d) Electrical Stimulation Machines (E Stim)

These machines are designed to help strengthen muscles. The bandpath of the XXXXX models is a full XXXXX, encompassing the entire spectrum of the EMG signal.

(e) Related software

The XXXXX software that accompanies the items described above provides information for patient protocols, treatment goals, evaluation, analysis of exercises performed in the office or at home, and generates numerous reports.

4) We understand that XXXXX uses the XXXXX products described above in two ways.

•   First, the EMG biofeedback machine helps identify specific individuals that have a pelvic floor musculature weakness or dysfunction and determines whether or not they are substituting accessory muscular use. The pelvic floor muscle is subject to voluntary control; whereas the detrustor musculature (the bladder) is comprised of muscle over which there is no voluntary control. Involuntary muscles can be strengthened through the use of external nerve stimulation by using the E Stim machines. This method might also be used for children or for patients who cannot tolerate the internal stimulation sensors/probes.

•   Patients are also taught contractile muscle function. These products provide feedback to train these individuals to focus on, and to properly move the right muscle groups. The computer software records the exercises performed by the patient to help the health care practitioner track their progress.

5) Some patients perform the exercises exclusively in XXXXX clinic. In most cases however, the patient is first trained to perform the exercises in the clinic and then will be provided with the appropriate equipment so he or she may continue the exercises at home. Certain items are sold by XXXXX at cost to patients for their exclusive use (e.g., the internal sensors/probes).

Ruling Requested

Are the XXXXX (tm) EMG/Stimulation Sensors (rectal and vaginal probes), EMG/Stimulation Surface Sensors, EMG Biofeedback Machines, Electrical Stimulation Machines (E Stim) and related software programs zero-rated under the Excise Tax Act (ETA)?

Ruling Given

Based on the information provided, we rule that the XXXXX EMG/Stimulation Sensors (rectal and vaginal probes) and EMG Biofeedback Machines designed for at-home use are zero-rated by section 37 of Part II of Schedule VI to the ETA.

This means these products are taxable at a rate of 0%. They are not subject to the GST/HST upon importation by virtue of section 6 of Schedule VII to the ETA.

The XXXXX EMG/Stimulation Surface Sensors, Electrical Stimulation Machines and related software programs do not fall under any exempting or zero-rating provisions in the ETA. Therefore, they are subject to the 7% GST or to the 15% HST in the participating provinces (Nova Scotia, New Brunswick and Newfoundland and Labrador).

Explanation

Section 37 of Part II of Schedule VI zero-rates "... an incontinence product that is specially designed for use by an individual with a disability". Products that fall under this section include disposable and reusable briefs, pads, adult diapers, liners, etc., that are specially designed to assist an individual in coping with incontinence. We also consider that this section applies to products specially designed for use by an individual with a disability in treating incontinence.

In order to be zero-rated under this section, the product must be an incontinence product. That is, a product will not be zero-rated under this section if it has been designed for other applications and may be used for conditions other than incontinence. In addition, to be zero-rated by this section, the product must have been specially designed to be used by the individual suffering from a disability and not by someone else, namely a health care practitioner.

We understand that biofeedback equipment used in treating incontinence involves a sensor that is inserted in the individual's body and connected to a computer or a portable home therapy unit to give the individual a light signal, bar graph or audible tone to show how the muscles of the pelvic floor are contracting and relaxing. Some biofeedback equipment has small patches called surface electrodes that are placed on the outside of the body eliminating the need for an internal sensor. Some surface electrodes may be used in conjunction with internal sensors. The surface electrodes help the individual learn not to focus on the use of muscles that do not help with incontinence control, and the internal sensors help focus the individual's attention on contracting the correct muscles of the pelvic floor.

The XXXXX EMG Stimulation Sensors (rectal and vaginal probes) are internal probes that have been designed and manufactured for insertion in the body. Once the health care practitioner explains the procedure, the individual is able to use these products in the course of treatment to alleviate incontinence. These sensors are connected with biofeedback machines that track the exercises performed by the individual to strengthen the appropriate muscles of the pelvic floor in order to treat the individual's condition.

The biofeedback machines imported from XXXXX by XXXXX are either hand held home trainers or models that can be connected to the patient's laptop or home computer for use in the patient's home. They set out the length of the exercise sessions to be performed and provide audio and or visual feedback to encourage success by pointing out when the exercises are performed correctly. As such, we consider these sensors, together with these biofeedback machines to be specially designed for use by an individual with a disability.

We note that certain XXXXX biofeedback machines have been designed for use by health care practitioners in a hospital, long-term care facility or clinic setting and have not been designed for home training. These would not be considered to be specially designed for use by an individual with a disability.

Based on the information provided, we do not believe that the XXXXX EMG/Stimulation Surface Sensors have been designed specifically for use by an individual suffering from incontinence. The design of the XXXXX (tm) surface sensors is a XXXXX that might be used on different parts of the body. There is no indication that these sensors were designed for placement in the pelvic/perineal area. In addition, the surface sensors are generally placed by the health care practitioner on the patient's body in the course of providing treatment for this condition and as such, cannot be said to be specially designed for use by an individual with a disability.

We understand that the function of electrical stimulation machines is to deliver small amounts of stimulation to the nerves and muscles of the pelvic floor and bladder. The stimulation is generated through a small electrode that is placed in the vagina or rectum. The electrode is attached to a portable battery-operated device or a larger clinical device in a health practitioner's office or facility. The electrode delivers small amounts of electrical current that are strong enough to cause a muscle contraction, but not strong enough to cause injury.

The Electrical Stimulation Machines (E Stim) imported by XXXXX from the XXXXX series do not have preprogrammed settings specifically designed to treat the different forms of incontinence. Information provided in XXXXX promotional material indicates that the band path of its machines is a full XXXXX XXXXX encompassing the entire spectrum of the EMG signal. We note in this connection that some electrical stimulation machines specifically designed for treating incontinence have settings programmed for XXXXX to treat urge incontinence and XXXXX to treat stress incontinence. Therefore, we consider the XXXXX machines to be capable of being used to treat other conditions requiring electrical stimulation and as such are not specifically designed for treating incontinence.

Finally, we consider that the XXXXX software programs provided for use with the products mentioned above are specially designed for use by a health care practitioner in treating persons with incontinence. They provide information, reports and analysis of exercise sessions to assist the practitioner in analyzing and evaluating the treatment provided. As such, these products have not been specially designed for use by an individual with a disability but for use by the health care practitioner.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies & Government Division
Excise and GST/HST Rulings Directorate