South Carolina approves tax relief

COLUMBIA, S.C. - After five years of trying to convince lawmakers that Medicare reimbursement for durable medical equipment should not be subject to the state's sales tax, providers here finally prevailed. On June 18, lawmakers passed a bill that gradually eliminates the sales tax on DME over the next five years. The phased-in reduction began July 1 and cuts the state's 5% sales tax on DME by 0.5% over the next year (saving providers about $1 million), 1.5% the following year (a $3.7 million savings), and 1% a year thereafter. "We see the light at the end of the tunnel, even though it is a five-year tunnel," said Bobby Horton, executive director of South Carolina Medical Equipment Services. "But we want to shorten that and that will be our goal next year." As part of its efforts to educate lawmakers on the need for sales-tax relief, South Carolina providers stressed several points. First, lawmakers previously assumed that providers, like other businesses, could pass the tax on to their customers. That's not the case with HME providers, who can collect only the 20% co-pay from Medicare beneficiaries. As a result, providers must pay the sales tax themselves at a time of declining Medicare reimbursement. Additionally, Horton and others pointed out, providers in neighboring states--Georgia and North Carolina--don't pay a sales tax. That puts South Carolina providers in border communities at a competitive disadvantage. That's especially true for four South Carolina counties that are part of the Charlotte, N.C., competitive bidding area for 2008. "There is a good possibility that some of these people upstate will not get a bid and risk going out of business," Horton said. That argument resonated with state lawmakers, he said.