Heart Devices Exempt as Prosthetic Devices in New York

Wednesday, March 21st, 2012

 
 
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New York
General

The New York State Department of Taxation and Finance recently issued an advisory opinion discussing the taxability of heart devices and associated equipment and services. N.Y. Advisory Op. of the Commr. of Taxn. and Fin. TSB-A-12(5)S (Mar. 6, 2012).

The business that sought the opinion needed to know whether medical devices and related services it provides are subject to sales tax. The business sells therapeutic devices for patients with advanced stage heart failure. Additionally, the business provides several products and services related to the heart devices: external components used in conjunction with the devices (e.g., power sources, cables, etc.); circulatory support pumps and related parts; medical instruments used during implantation; supplies (e.g., vests/holsters to easily carry any external components); and training and maintenance services provided in connection with the use and upkeep of the equipment.

New York taxes sales of tangible personal property but provides exemptions for certain drugs and medicines, prosthetic devices, and medical equipment. In the opinion, the commissioner advised that because the heart devices temporarily assist one or both ventricles in the human heart that are permanently malfunctioning, they qualify as prosthetic devices, and are therefore exempt. See N.Y. Tax Law Sec. 1115(a)(4). In addition, the external and component parts; the circulatory support pump and related parts; and the supplies similarly qualify for the prosthetic device exemption because they are integral to the normal use of the heart device. However, the medical instruments used during implantation do not qualify for the prosthetic device exemption because they do not replace a body function. And, while the medical instruments qualify as medical equipment, the ruling explained medical equipment is not exempt when it is purchased for use in performing medical services for compensation. See 20 N.Y. Comp. Codes R. and Regs. 528.4(e)(4). Maintenance agreements, service labor, and parts are also exempt because the item subject to the maintenance agreement is an exempt prosthetic device. See 20 N.Y. Comp. Codes R. and Regs. 525.5(d). Training services offered in connection with the use of the heart device will also be exempt from tax, as educational services are not among the services specifically identified as taxable in New York.


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