Provision of Medical Equipment with Technician Services Taxable in New York

Wednesday, July 31st, 2013

New York

In a recent advisory opinion, the New York Department of Taxation and Finance held that certain "mobile medical services" were taxable. The services consisted of a taxable lease of medical equipment and a non-taxable sale of services.

The taxpayer provided medical equipment and staff to customers. There were separate charges for the medical equipment and staff services. The taxpayer's staff delivered the equipment to the customer's facility, set it up, and made sure it functioned properly. The taxpayer employed or contracted with licensed technicians to operate the equipment. The attending physician, an agent of the customer, directed the technician on whether, how, and when to use the equipment. The physician was in charge of the test or procedure and had final say in these matters.

New York taxes sales and leases of tangible personal property. For a transaction to be a lease, the customer must get (1) custody or possession of the property, (2) the right to custody or possession of the property, or (3) the right to use, control, or direct the use of the property. New York only taxes services that it specifically enumerates as taxable. The question here was whether the transaction was just the sale of services or whether it was a lease of the equipment plus the sale of staff services.

The Department of Taxation and Finance held that the transaction involved a lease as well as a sale of services. Although the taxpayer's staff operated the equipment, they did so at the direction of the attending physician. The customer therefore had the right to direct the use of the equipment. Because the customer received the right to control or direct the use of the equipment, there was a lease. The transaction was subject to tax as a lease of tangible personal property. The separately stated charges for the staff's services were not taxable because New York does not specifically enumerate these services as taxable.

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