Are cost-reimbursement charges for donated, non-transplantable human tissue supplied for medical research and training subject to Georgia sales tax?

Plain-English summary

The taxpayer received donated human bodies without paying the donor's estate or family, then supplied intact cadavers or requested tissue portions to hospitals, universities, training organizations, medical facilities, and device manufacturers for research and education. It charged cost-plus fees reflecting acquisition, removal, processing, preservation, storage, transportation, distribution, and disposal. Tissue not recovered for qualified use was cremated and disposed of or returned to next of kin on request.

The Department ruled that the described non-transplantable human tissue was not tangible personal property for Georgia sales-and-use-tax purposes. As a result, the reasonable cost-reimbursement charges did not constitute retail sales and were not subject to sales tax.

The provider was still the taxable consumer of tangible personal property and taxable services it bought or used in its operations.

The ruling answered the overall treatment of these tissue transactions without considering possible customer-specific exemptions for hospitals, universities, research facilities, or manufacturers.

What this means for you

Tissue providers and medical-training organizations

The holding is tied to donated, non-transplantable human tissue used for research or training and to reasonable cost-reimbursement charges. It should not be generalized to transplantable organs, unrelated biological products, or different transaction structures.

Tax and accounting teams

Nontaxable customer charges do not make the provider's own inputs exempt. The ruling expressly requires the provider to pay sales or use tax on taxable property and services it purchases or uses.

Common questions

Q: Why were the tissue-related charges not taxable?

A: The Department concluded that the described non-transplantable human tissue was not tangible personal property, so reimbursing reasonable transaction costs was not a retail sale.

Q: What costs did the provider's fees cover?

A: Acquisition, tissue removal, processing, preservation, storage, transportation, distribution, and disposal, using cost-plus rather than supply-and-demand pricing.

Q: Did the ruling depend on the customer's exempt status?

A: No. The taxpayer specifically asked for the overall treatment without customer-specific hospital, university, research, or manufacturing exemptions.

Q: Are the provider's own purchases tax-free?

A: No. It remains liable for sales or use tax on taxable tangible personal property and services it buys or uses.

Q: Does the ruling cover tissue for transplantation?

A: The holding identifies the property as non-transplantable human tissue supplied for research and training. It does not rule on transplant transactions.

Q: Can another organization rely on this ruling?

A: No. It is limited to the requesting provider's tissue, charges, and represented facts.

Citations and references

Authorities discussed:

• O.C.G.A. § 48-8-30(a), (f), and (g) -- purchaser sales and use tax liability
• O.C.G.A. § 16-12-160 -- human body and tissue transactions and permitted charges
• 42 U.S.C. § 274e(a) -- federal rule on human organs for transplantation
• 42 U.S.C. § 289g-2(a) -- federal rule on human fetal tissue
• Uniform Anatomical Gift Act § 16 (2006) -- reasonable charges referenced by the taxpayer

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2017-10

Original ruling text

Georgia Letter Ruling: LR SUT-2017-10
Dated: April 26, 2017
Topic: Miscellaneous Transactions – Human Tissue
This letter is in response to your letter ruling request dated June 15, 2016 regarding the application of Georgia sales
and use tax to certain sales made by your client, [Redacted] (Taxpayer).
Facts as Presented by Taxpayer
Taxpayer provides human tissue for medical research and training. Taxpayer's customers include medical facilities,
hospitals, universities, academic medical centers, medical training organizations and medical device manufacturers,
amongst others. Taxpayer receives donated human bodies shortly after the time of death in order to provide the medical
community with either complete, intact cadavers, or portions of human tissue according to its customers' specific
needs associated with their training and research requirements. Taxpayer makes no payments to a donor's estate or
family for the donated remains. Highly skilled experts are used to remove parts in such a way as to preserve the
integrity and usefulness of those bodies and requested tissue for specific training and research purposes. Any tissues
that are not recovered for a qualified use are cremated and either disposed of or returned to the next of kin upon
request.
In general, public policy and social norms rule out establishing a marketplace for the sale of vital human organs and
body tissue. This has resulted in federal and state statutes and regulations outlawing the sale of human tissue under
certain circumstances. Specifically, the National Organ Transplant Act (“NOTA”) of 1984 bans the sale of human
organs and tissue for transplant, but allows tissue banks to charge fees for tissue and services associated with procuring
and preparing tissue. In addition, 42 U.S. Code § 274e(a) provides that “[i]t shall be unlawful for any person to
knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human
transplantation if the transfer affects interstate commerce.” Further, the federal Public Health Service Act prohibits
the sale of human fetal tissue as stated in 42 U.S. Code § 289g-2(a), “It shall be unlawful for any person to knowingly
acquire, receive, or otherwise transfer any human fetal tissue for valuable consideration if the transfer affects interstate
commerce.” Additionally, the Uniform Anatomical Gift Act (reflected under O.C.G.A. § 16-12-160), governs both
tissue for transplantation into living patients as well as the making of anatomical gifts for the advancement of science.
Section 16 of the Uniform Anatomical Gift Act (2006) states that “A person may charge a reasonable amount for the
removal, processing, preservation, quality control, storage, transportation, implantation, or disposal of a part.”
These legal parameters have shaped the manner in which human bodies are gathered and then, in whole or in part,
distributed, with no distinction on whether the parts are used for purposes of research or transplanting. As is customary
for the industry, Taxpayer charges fees to its customers in order to recover the costs associated with the acquisition,
storage, preservation, preparation and distribution of the tissue. Cost-plus pricing, rather than supply-demand metrics,
establish charges invoiced to Taxpayer's customers. The Georgia legislature has seen fit to also address this topic in
O.C.G.A. § 16-12-160, which, like the Uniform Anatomical Gift Act above, provides:
(a) It shall be unlawful, except as provided in subsection (b) of this Code section, for any person,
firm, or corporation to buy or sell, to offer to buy or sell, or to assist another in buying or selling or
offering to buy or sell a human body or any part of a human body or buy or sell a human fetus or
any part thereof.
(b) The prohibition contained in subsection (a) of this Code section shall not apply to:
(1) The purchase or sale of whole blood, blood plasma, blood products, blood derivatives,
other self-replicating body fluids, or hair;
(2) A gift or donation of a human body or any part of a human body or any procedure
connected therewith as provided in Article 6 of Chapter 5 of Title 44 or to the payment of
a fee in connection with such gift or donation pursuant to subsection (b) of Code Section
44-5-154 if such fee is paid to a procurement organization, as that term is defined in Code
Section 44-5-141;

Georgia Letter Ruling: LR SUT-2017-10
Dated: April 26, 2017
Topic: Miscellaneous Transactions – Human Tissue
Page 2 of 3

(3) The reimbursement of actual expenses, including medical costs, lost income, and travel
expenses, incurred by a living person in giving or donating a part of the person's body;
(4) The payment of financial assistance under a plan of insurance or other health care
coverage;
(5) The purchase or sale of human tissue, organs, or other parts of the human body for
health sciences education; or
(6) The payment of reasonable costs associated with the removal, storage, or transportation
of a human body or any part of a human body given or donated for medical or scientific
purposes.
(c) Any person, firm, or corporation convicted of violating subsection (a) of this Code section shall
be guilty of a felony and, upon conviction thereof, shall be punished by a fine not exceeding
$5,000.00 or by imprisonment for not less than one year nor more than five years, or both.
The fees that Taxpayer lists and charges are an aggregate reflection of the services it provides related to its tissue
removal, processing, preservation, storage, transportation and disposal, and are allowable under Georgia Statutes.
With this in mind, Taxpayer believes it is not involved in a sale, is not a retailer and should not be taxable under
O.C.G.A. § 48-8-2, or any other sales or use tax definitions. Taxpayer believes it is a service provider, and should not
be required to collect sales or use tax on its charges to its clients. Based on the information above, and the fact that
Taxpayer’s customers are billed on a cost-plus basis, Taxpayer believes that the transactions involving the provision
of a human body or body parts to a third party for research and/or medical advancement purposes should be exempt
from the Georgia sales tax.
Taxpayer understands that there may be other exemptions from the Georgia sales tax available to the services in
question, including customer exemptions for transactions involving tissue transfers to hospitals, universities, and
medical research facilities, and possible research and development exemptions for sales to medical device
manufacturers. In this instance, Taxpayer is requesting the Department's opinion on the taxability of these transfers of
tissue overall, and the position that Taxpayer should be treated as a service provider and not a retailer, without
considering customer specific exemptions.
Issue
How does Georgia sales and use tax apply to the transactions described above?
Analysis
Georgia levies and imposes a tax (subject to certain exemptions) on the retail purchase, retail sale, rental, storage, use,
or consumption of tangible personal property and on certain enumerated services. 1 Every purchaser (including a lessee
or renter) of tangible personal property or taxable services at retail in this state is liable for sales and use tax. 2 Whenever
a purchaser (including a lessee or renter) of tangible personal property or taxable services does not pay the tax imposed
upon him or her to the retailer, lessor, or dealer who involved in the taxable transaction, the purchaser, the Department
of Revenue may assess and collect the tax directly against and from the purchaser.3

1

O.C.G.A. §§ 48-3-1 and 48-8-30.
O.C.G.A. § 48-8-30(a) and (f).
3
O.C.G.A. § 48-8-30(g).
2

Georgia Letter Ruling: LR SUT-2017-10
Dated: April 26, 2017
Topic: Miscellaneous Transactions – Human Tissue
Page 3 of 3

Ruling
The Department has determined that, due to the nature of the property, the non-transplantable human tissue described
above is not tangible personal property for purposes of Georgia’s Sales and Use Tax Act. Thus, the charges for the
reimbursement of reasonable costs associated with the subject transactions do not rise to the level of a retail sale of
tangible personal property as contemplated by the General Assembly. Accordingly, these charges are not subject to
Georgia sales and use tax. Taxpayer is liable for payment of sales and use tax on the purchase price of all tangible
personal property and taxable services it purchases or uses.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. In addition,
subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different tax treatment than that expressed in this ruling.