Is a tumor-treating-fields cancer-treatment device, with its supplies and replacement parts, exempt from NY sales tax as medical equipment?

Plain-English summary

The Petitioner is an oncology company selling a tumor-treating-fields (TTF) device that produces alternating electrical fields -- applied through electrodes on the scalp -- to treat solid tumors of the head (it disrupts cancer-cell division). The device comes with a field generator, cables, battery, transducer arrays (the adhesive electrodes), and a "health and hygiene" kit (tape, gauze, Surgilast dressing net, surgical scissors). A certified physician prescribes it; the company ships components to local technical-support staff or the physician, then to the patient, who is trained to self-administer. It bills the patient's insurer or the patient (not the physician's office). The company says there are no non-medical uses.

The Office of Counsel concluded:

• The device = exempt medical equipment. Section 1115(a)(3) exempts medical equipment and supplies primarily and customarily used for medical purposes and not generally useful in the absence of illness, injury, or incapacity (20 NYCRR 528.4(e)). The TTF device treats cancer and has no non-medical use, so it qualifies.
• The "health and hygiene" kit = exempt medical supplies (20 NYCRR 528.4(g)).
• Replacement parts = exempt if clearly identified as medical-equipment replacement parts (20 NYCRR 528.4(e)(3)).
• Patient training = not taxable -- education services aren't enumerated taxable services.
• The key limit: the exemption does not apply when the equipment/supplies are sold for use in providing medical (or similar) services for compensation. So when the buyer is the patient/end-user, no tax is due; if instead it's sold to someone who will use it to provide care for pay, the company must collect tax.

What this means for you

Medical-device makers / sellers

Equipment primarily and customarily medical and not useful without illness/injury is exempt under section 1115(a)(3) -- here, a cancer-treatment device and its medical supply kit and identified replacement parts.

Who buys it matters

The exemption turns on the purchaser/use: exempt when sold to the patient/end-user, but taxable when sold to a provider who uses it to render care for compensation. Track the buyer's role.

Training rides along as nontaxable education

Patient training by the physician or your support staff is not taxable, because education isn't an enumerated taxable service.

Common questions

Q: Is our cancer-treatment device exempt from New York sales tax?
A: Yes -- as medical equipment primarily and customarily used for medical purposes and not useful absent illness, when sold to the patient/end-user. The supply kit and identified replacement parts are exempt too.

Q: When would we have to charge tax?
A: When the device or supplies are sold for use in providing medical services for compensation (i.e., to a provider using it to render care for pay), rather than to the patient.

Q: Is the patient training taxable?
A: No -- education services aren't enumerated taxable services.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1115(a)(3) (exemption for medical equipment and supplies)
• Tax Law section 1105(a) (sales tax on tangible personal property)
• 20 NYCRR section 528.4(e) (definition of medical equipment)
• 20 NYCRR section 528.4(g) (medical supplies)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(7)S
Sales Tax
March 17, 2015

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S140228A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTED (“Petitioner”). Petitioner asks whether its sale of their tumor treating
fields device (“Device”) is exempt from sales and use tax in New York as medical equipment
pursuant to New York Tax Law §1115(a)(3). We conclude that the Device and any required
replacement parts qualify as medical equipment and are exempt from sales and use tax.

Facts
Petitioner is a commercial-stage oncology company dedicated to the development and
commercialization of the Device, which is used for the treatment of adult patients with solid
tumors of the head. The treatment works by producing alternating electrical fields within the
human body that are believed to disrupt the rapid cell division exhibited by cancer cells. The
alternating electrical fields are applied to the brain through electrodes placed on the scalp.
Petitioner asserts that there are no non-medical uses for the Device.

There are three primary components to the Device: 1) An electric field generator,
connection cables, a portable battery, power supply, rack and a power cord, 2) INE transducer
arrays (insulated electrodes that adhere to the body and deliver the electric fields), and 3)
ancillary items and accessories consisting of a carry bag, TTF Bags, operation manuals and selfexchange kits. The self-exchange kit, or “health and hygiene” kit, contains medical items such as
tape, gauze, Surgilast (a tubular elastic stretch net designed to serve as a secondary dressing,
applying gentle pressure to keep bandages or other medical devices securely in place without
adhesive tape) and surgical scissors. The “TTF” bags are anti-static bags made of plastic that

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surround the product for protection during shipment. All of the ancillary items are integral to the
long-term safe use of the Device and none of the accessory equipment, except the self-exchange
kit, can be used except in conjunction with the Device.

To obtain the Device, a certified physician writes a prescription for the patient and
submits the prescription to Petitioner’s shipping facility located outside of New York State. The
prescription is filled and the components of the device are shipped to the closest local
technical support staff (who are employed by Petitioner) or to the certified physician's office.
The patient will receive an agreement to review and sign once he or she is trained to use the
device. The technical support staff and the certified physician are trained to use the device in
advance.

The day the patient starts treatment, the local technical support staff delivers the
components of the Device to the patient.

The local support staff will then train and

educate the patient on the proper way to administer the treatment and the technical aspects of
the device. The patient is provided with a user manual and technical support phone number.
The patient then receives additional training and guidance and treatment initiation from his or
her physician. The treating physician is responsible for the ongoing care of the patient.
All medical questions are referred to the treating physician.
It is the patient’s responsibility to request additional arrays. Petitioner replaces
batteries once capacity falls below a certain threshold. After initial treatment starts, Petitioner
typically ships arrays and other components directly to patients.

Petitioner provides a monthly invoice containing one line item that combines the charge
for the durable components and a monthly fee to purchase transducer arrays. Also included in
this charge is around-the-clock technical support.

Petitioner bills the patient's third-party

insurance provider, managed care company or, in some cases, the patient directly, but does not
bill the treating physician’s office.

If a patient decides to discontinue the therapy, he or she returns the equipment and

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Sales Tax
March 17, 2015

any remaining supplies to Petitioner at Petitioner's expense. As the arrays cannot be reused,
Petitioner is responsible for collection and proper disposition of the arrays.

Analysis

Retail sales of tangible personal property and certain enumerated services are subject to
sales tax. See Tax Law § 1105(a),(c). As relevant here, Tax Law § 1115(a)(3) exempts medical
equipment and supplies from the tax imposed by Tax Law § 1105(a) to the extent they are
primarily and customarily used for medical purposes and not generally useful in the absence of
illness, injury or physical incapacity. See 20 NYCRR § 528.4(e)(2).

Section 528.4(e) of the Sales Tax Regulations defines medical equipment:
(1) Medical equipment means machinery, apparatus and other devices (other than
prosthetic aids, hearing aids, eyeglasses and artificial devices which qualify for
exemption under section 1115(a)(4) of the Tax Law), which are intended for use
in the cure, mitigation, treatment or prevention of illnesses of diseases or the
correction or alleviation of physical incapacity in human beings.

The exemption contained in Tax Law § 1115(a)(3) and 20 NYCCR § 528.4 does not
apply to the sale of medical equipment and supplies for use in performing medical and similar
services for compensation.

Petitioner’s Device is used for the treatment of cancer patients with solid tumors of the
head. Petitioner asserts that the equipment and supplies are not useful for purposes other than
the medical use described above. Accordingly, the Device and the associated supplies would be
considered medical equipment.

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March 17, 2015

If Petitioner sells or leases its products for use in providing medical care for
compensation, Petitioner must collect sales or use tax due from the purchaser. However, when
the purchaser is the patient/end-user of the Device, the exemption applies and no sales tax is due.

Similarly, the items in the “health and hygiene” kit are medical supplies exempt under
20 NYCRR § 528.4(g), other than when sold for use in providing medical care for compensation.

Any charges for the training provided by either the treating physician or the technical
support staff to the patient are not taxable, because education services are not among the
enumerated taxable services.

Finally, replacement parts for medical equipment are exempt from tax provided such
replacement parts are identifiable as medical equipment replacement parts. Therefore, so long as
Petitioner clearly identifies any and all replacement parts for the Device as such, they would be
exempt from sales tax. See 20 NYCRR § 528.4 (e)(3).

DATED: March 17, 2015

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.