Is a heart mitral-valve repair clip -- sold with its single-use guide catheter and delivery system for one price -- exempt as a prosthetic device?

Plain-English summary

The Petitioner makes a percutaneous mitral-valve repair system used to treat mitral regurgitation (a leaking heart valve) without open-heart surgery. The system has two parts sold together for one price per procedure: a steerable guide catheter and a clip delivery system that places a small cobalt-chromium clip (covered in Dacron) on the valve leaflets. The implanted clip lets the valve close properly, permanently fixing the leak. The catheter and delivery system exist only to position and deploy the clip, can't be used alone, and don't work with any other company's catheter. The Petitioner asked whether the system is an exempt prosthetic device.

The Office of Counsel concluded the system is exempt as a prosthetic aid under Tax Law 1115(a)(4):

• The clip is a prosthetic aid. A prosthetic aid must completely or partially replace a missing body part or the function of a permanently inoperative/malfunctioning body part, be primarily and customarily used for that, and not be generally useful absent illness/injury (20 NYCRR 528.5(b)(1)). The implanted clip restores the function of the defective mitral valve, so it qualifies.
• The whole single-price system rides along. Because the system is sold for a single price as one integral product, the components aren't sold separately, and the catheter/delivery system are merely the means to insert the clip, the entire product qualifies as an exempt prosthetic aid.

What this means for you

Implantable-device makers and sellers

A device that is implanted to restore the function of a failing body part (here, a heart valve) is an exempt prosthetic aid. New York looks at function, not whether it's "equipment."

Single-price, integral delivery systems follow the implant

When the delivery hardware (catheters, applicators) is sold bundled at one price and exists only to place the prosthetic, the whole system is treated as the exempt prosthetic -- you don't have to carve out the delivery components. (Contrast: pricing/selling the delivery tools separately for independent use could change the analysis.)

Document the integral, single-charge nature

The favorable facts were a single per-procedure charge, components not sold separately, and a delivery system usable only to insert the clip. Keep your invoicing and product design consistent with that to support exemption.

Common questions

Q: Is an implanted heart-valve repair clip taxable?
A: No. It's an exempt prosthetic aid because it restores the function of the failing mitral valve.

Q: What about the catheter and delivery system sold with it?
A: They're exempt too here, because the system is sold for a single price as one integral product and those parts only serve to insert the clip.

Q: Would selling the catheter separately change things?
A: Potentially. The result relied on the integral, single-charge nature; separately sold components with independent uses could be analyzed differently.

Citations and references

• Tax Law section 1115(a)(4) (exemption for prosthetic aids and artificial devices)
• 20 NYCRR section 528.5(b)(1) (prosthetic device; three-part test)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_11s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-14(11)S
Sales Tax
July 2, 2014

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION S101214A

The Department of Taxation and Finance received a Petition for Advisory Opinion
from REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED.
Petitioner asks whether its REDACTED (X) system is exempt from sales and use tax as a
prosthetic device. Alternatively, it asks whether steerable guide catheters and clip delivery
systems qualify as medical supplies.
We conclude that X system is exempt from sales and use taxes as a prosthetic aid.
Facts
Petitioner manufactures and sells medical devices that enable the repair of the mitral
valve in the treatment of patients suffering from the effects of functional and degenerative
Mitral Regurgitation (MR). Use of X system permits the repair of the mitral value without the
need of open heart surgery.
The system is a percutaneous device designed to perform an edge-to-edge
reconstruction of an insufficient mitral valve while the heart is beating as an alternative to a
conventional surgical approach.
The mitral valve is a one-way valve that separates the left atrium (a chamber in the
heart which collects blood from the lungs) from the left ventricle (a chamber in the heart
which pumps blood to the rest of the body). A defective mitral valve causes mitral
regurgitation (MR): blood flowing backwards into the left atrium because the leaflets (or
flaps) of the mitral valve do not close properly and leak. The result of leakage in the mitral
valve is a decreased blood flow to the body.
Petitioner’s X system consists of two major components:
 a steerable guide catheter, and
 a clip delivery system, which includes a clip.
The clip delivery system places a clip on the mitral valve leaflets, which results in permanent
leaflet approximation and a double mitral valve orifice. In laymen’s terms, the clip enables
the valve to close properly, preventing leakage of blood back into the left atrium of the heart.
The delivery system includes a control device that a physician operates to manipulate the

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Sales Tax
July 2, 2014

steering mechanism on the handles of the catheter and a delivery system to position the clip
down to the mitral valve.
The clip itself is a composite of cobalt and chromium covered with a Dacron fabric,
which promotes healing. The clip is preassembled to the tip of the clip delivery system via
the gripper line, lock line, and actuator connection to the threaded stud.
To access the left atrium of the heart, a standard transpetical crossing technique is
performed by the physician operating the device. The steerable guide catheter is then inserted
into the femoral vein and delivered into the left atrium via a guide wire. The clip delivery
system is then inserted into the catheter and the clip is properly positioned over the mitral
valve. Manipulation of the steering mechanism on the handles of the catheter and delivery
system positions the clip down to the mitral valve. The clip is actuated (i.e., opened, closed,
locked, and deployed) through manipulation of levers on the handle of the delivery system.
When placement is successful, the clip is closed and deployed from the clip delivery
system. If placement of one clip does not result in an acceptable reduction of MR, a second
clip may be placed to further reduce MR. If a second clip is installed during the same
procedure as the first clip is installed, a second X system will be used for installation but the
steerable guide catheter used to install the first clip is also used to install the second clip.
The steerable guide catheter is designed to provide a pathway for the clip delivery
system only. Its design is integral to the clip system. The catheter has an internal locking
mechanism, which allows the operator to maintain precise steering control of the clip delivery
system while in the patient. The delivery system cannot be used alone without the catheter.
Nor can the delivery system be used with any other company’s guiding catheter.
Petitioner’s sells X system on a per procedure basis for a single charge.
Analysis
Tax Law section 1115(a)(4) exempts from sales and use tax the receipts for prosthetic
aids, artificial devices, and component parts thereof purchased to correct or alleviate physical
incapacity in human beings. Sales tax regulation section 528.5(b)(1) provides that:
In order to qualify as a prosthetic aid, a hearing aid, eyeglasses or an artificial device,
the property must either completely or partially replace a missing body part or the function of
a permanently inoperative or permanently malfunctioning body part and must be primarily
and customarily used for such purposes and not be generally useful in the absence of illness,
injury or physical incapacity.
The clip that is attached to the mitral valve constitutes a prosthetic aid. X system is an
integral product in that it is sold for single price; the components are not sold separately, and

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the delivery component can be used only to insert the clip. The entire product qualifies as a
prosthetic aid because the delivery component is merely the means to insert the heart valve
clip. Accordingly, X system is exempt from sales and use taxes.

DATED: July 2, 2014

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to
the facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued
or for the specific time period at issue in the Opinion. The information provided in
this document does not cover every situation and is not intended to replace the law
or change its meaning.