208 So. 3d 473
La. Ct. App.2016Background
- Bio-Medical Applications (Fresenius dialysis clinic) purchased prescription drugs from AmerisourceBergen (ABC) for use in treating both Medicare and non-Medicare ESRD patients at its Franklinton clinic.
- Bio-Medical sought a refund ($33,201.48) of local (Washington Parish) sales taxes paid on those drugs for a specified tax period, claiming the purchases were excluded or exempt under various Louisiana statutes because they were made "under the provisions of Medicare" or "through or pursuant to a Medicare Part B and D plan."
- The Sheriff (local tax collector) filed a declaratory-judgment action seeking a ruling that the purchases were taxable (no exclusion/exemption/refund). The district court granted the Sheriff’s motion in part, denied Bio-Medical’s motion, and dismissed Bio-Medical’s reconventional demand.
- The district court (and this court on review) found no genuine factual dispute: drugs were bulk-purchased by the clinic, paid to ABC by Bio-Medical (not Medicare), not segregated by payer, and Medicare did not control vendor, price, or tax treatment.
- The central statutory provisions at issue: La. R.S. 47:301(10)(u) (local sales exclusion for sales "made under the provisions of Medicare"), La. R.S. 47:337.9(F) (exemption for prescription drugs purchased "through or pursuant to a Medicare Part B and D plan"), and La. R.S. 47:315.3 (refund for taxes paid "by or under the provisions of Medicare").
Issues
| Issue | Plaintiff's Argument (Bio-Medical) | Defendant's Argument (Sheriff) | Held |
|---|---|---|---|
| Whether bulk purchases of drugs by a dialysis clinic are excluded from local sales tax under La. R.S. 47:301(10)(u) (sales "made under the provisions of Medicare"). | The purchases are "under the provisions of Medicare" because the drugs are ordered/required to meet Medicare regulatory conditions for treating Medicare ESRD patients; statute should be read broadly to include Medicare-guided purchases. | The sales are third-party, bulk transactions paid by the clinic to ABC (not paid by Medicare), Medicare does not control vendor/price/tax, so sales are not "made under the provisions of Medicare." | Court: Not excluded. Statute ambiguous but legislative history and structure show it does not reach these third-party bulk purchases; exclusion does not apply. |
| Whether the purchases are exempt under La. R.S. 47:337.9(F) (drugs purchased "through or pursuant to a Medicare Part B and D plan"). | The purchases were "pursuant to Medicare Part B" because drugs administered to Medicare patients are part of Medicare-covered dialysis services. | The exemption applies only to purchases made through or under a Medicare Part B/D plan; these bulk clinic purchases were not made through any such plan and were not paid by Medicare. | Court: Not exempt. The statutory language is clear and must be strictly construed against taxpayer; exemption does not apply to bulk clinic purchases not made through a Part B/D plan. |
| Whether Bio-Medical was entitled to refund under La. R.S. 47:315.3 (taxes paid "by or under the provisions of Medicare"). | Bio-Medical sought refund pro rata for drugs administered to Medicare patients. | Relief under 47:315.3 requires tax payment by Medicare or payment "under the provisions of Medicare;" here Medicare did not pay the drug vendor. | Court: No refund under 47:315.3 for the transactions at issue (Bio-Medical did not challenge the district court’s finding on this point). |
| Admissibility of expert testimony and CMS interpretive guidance/regulatory materials. | Expert testimony (Dr. Long) and CMS guidances should be considered to explain Medicare practice and intent; CMS materials should be admitted. | Statutory interpretation is a question of law (experts can't opine on domestic law); published CMS regulations are judicially noticeable; interpretive guidance lacks force of law but may be considered. | Court: Correctly excluded expert legal-opinion testimony; erred in excluding nonbinding CMS interpretive materials as evidence but error was harmless because court considered them in de novo review. |
Key Cases Cited
- Cheairs v. State ex rel. Dep’t of Transp. & Dev., 861 So.2d 536 (La. 2003) (trial court has broad discretion to admit expert testimony)
- Wilson v. Wilson, 542 So.2d 568 (La. App. 1st Cir.) (expert witnesses may not give opinions on domestic law)
- Harrah’s Bossier City Inv. Co., LLC v. Bridges, 41 So.3d 438 (La. 2010) (distinguishing exclusions and exemptions; exclusions construed liberally for taxpayer)
- Willis-Knighton Med. Ctr. v. Caddo-Shreveport Sales & Use Tax Comm’n, 903 So.2d 1071 (La. 2005) (tax exemptions are strictly construed against the taxpayer)
- Perez v. Mortgage Bankers Ass’n, 135 S. Ct. 1199 (U.S. 2015) (agency interpretive rules lack the force and effect of law for APA notice-and-comment purposes)