Is assistive software that lets a severely disabled person operate a computer with a single switch (eye blink, breath puff) exempt as a prosthetic device?

Plain-English summary

The Petitioner makes software that lets a severely disabled person -- for example someone with quadriplegia or ALS (Lou Gehrig's disease) -- operate a standard Windows computer using a single switch such as an eye blink, eyebrow twitch, breath puff, sip/inhale, or head rock, restoring some ability to communicate. The software is not useful to a non-disabled person and actually hinders ordinary computer use. The Petitioner asked whether the software is an exempt prosthetic device.

The Office of Counsel held it qualifies as a prosthetic device and is exempt under Tax Law 1115(a)(4):

• The exemption. Section 1115(a)(4) exempts receipts from retail sales of "prosthetic aids... and artificial devices and component parts thereof purchased to correct or alleviate physical incapacity in human beings."
• The three-part test (20 NYCRR 528.5(b)). Property is a prosthetic device if it (1) completely or partially replaces a missing body part or the function of a permanently inoperative or malfunctioning body part, (2) is primarily and customarily used for that purpose, and (3) is not generally useful in the absence of illness, injury or physical incapacity.
• Software meets all three. The software replaces the disabled person's motor skills to type or control a mouse, is primarily used for that, and is not useful absent the user's disability -- like other recognized exempt devices (automobile controls for persons with disabilities, Braille typewriters, optical tactile converters in Publication 822).

Result: the software is exempt from sales and compensating use tax when purchased by a person with a disability.

What this means for you

Makers and sellers of assistive technology

Software (and hardware) that stands in for a lost or non-working body function -- here, the motor control needed to operate a computer -- can qualify as an exempt prosthetic device, not taxable software, when sold to the person with the disability. The label "software" does not make it taxable; the function controls.

The "not useful to the able-bodied" factor is key

A strong fact here was that the product is useless (even obstructive) to a non-disabled user. The more a product is specifically and exclusively for disability use, the better it fits the exemption.

Who is buying matters

The opinion frames the exemption as applying when the device is purchased by a person with a disability to correct or alleviate their incapacity. Keep that in mind for documentation.

Common questions

Q: Is assistive software taxable as "prewritten software"?
A: Not if it qualifies as a prosthetic device. Here, single-switch software that replaces lost motor function for a disabled user is exempt under section 1115(a)(4).

Q: What makes something a prosthetic device?
A: It must replace a missing or non-working body part or its function, be primarily and customarily used for that, and not be generally useful to someone without the disability.

Q: Would the same software be exempt if a non-disabled person bought it for general use?
A: The exemption is for property purchased to correct or alleviate physical incapacity; the opinion treats it as exempt when purchased by a person with a disability.

Citations and references

• Tax Law section 1115(a)(4) (exemption for prosthetic aids and artificial devices)
• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1110 (compensating use tax)
• 20 NYCRR section 528.5(b) (prosthetic devices; 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_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-14(28)S
Sales Tax
August 20, 2014

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

PETITION NO. S121022B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED. Petitioner asks whether its
computer software device qualifies as a prosthetic device exempt from sales tax. We conclude
that Petitioner’s computer software device qualifies as a prosthetic device under Tax Law §
1115(a)(4), and therefore is exempt from New York State sales and compensating use taxes.
Facts
Petitioner produces a software product that enables a disabled person to utilize a single
switch such as an eye blink, eye brow twitch, breath puff, inhale/sip or head rock to operate a
standard Windows based computer to restore some ability to communicate via that computer.
Petitioner claims its product “replaces or compensates for permanently inoperative or
malfunctioning body parts, specifically the loss of a person’s ability to use their voice box, arms,
or hands through severe injury or major disease such as quadriplegia and Amyotrophic Lateral
Schlerosis (ALS or Lou Gehrig’s Disease) . . . .” Petitioner states that the software is not in any
way useful in the absence of a disability, and claims that the software hinders the normal
operation of a computer by a non-disabled person.
Analysis
Tax Law § 1115(a)(4) exempts receipts from retail sales of “[p]rosthetic aids, hearing
aids, eyeglasses and artificial devices and component parts thereof purchased to correct or
alleviate physical incapacity in human beings” from the sales and compensating use taxes
imposed by Tax Law §§ 1105(a) and 1110, respectively, on the sale or use of tangible personal
property. Under the Sales and Use Tax Regulations, property qualifies as a prosthetic device if it
completely or partially replaces a missing body part or the function of a permanently inoperative
or malfunctioning body part, is primarily and customarily used for those purposes, and is not
generally useful in the absence of illness, injury or physical incapacity. See 20 NYCRR §
528.5(b). Examples of exempt prosthetic devices are automobile controls used by persons with
disabilities, Braille typewriters, and optical tactile converters. See Publication 822, Taxable
Status of Medical Equipment and Supplies, Prosthetic Devices, and Related Items. Like those
devices, Petitioner’s software product, as described by Petitioner, meets the three criteria in the
regulations. Petitioner’s software replaces the disabled person’s motor skills to type or otherwise
control a computer’s buttons or mouse, is primarily used for that purpose, and is not useful in the
absence of a user’s disability. Thus, it qualifies as a prosthetic device and is exempt from sales
and use taxes when purchased by a person with a disability.

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DATED: August 20, 2014

NOTE:

TSB-A-14(28)S
Sales Tax
August 20, 2014

/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.