Is a tablet-based remote health-monitoring product, and the devices sold with it, subject to sales tax?

Plain-English summary

A company sells a tablet-based remote health-monitoring product for people with chronic conditions. A tablet (loaded with the company's software so it works solely as a monitoring device) talks wirelessly to the company's web portal and to wireless health devices (a scale, blood-pressure cuff, or glucometer transmitter). A caregiver builds a care plan on the portal; readings flow from the devices to the tablet to the caregiver. The company charges a monthly fee for the product (system use, tech support, caregiver portal access), separately from the device sales. It asked what is taxable.

The Office of Counsel split the answer:

• Monthly product fee = taxable prewritten software. Prewritten software is tangible personal property (Tax Law section 1101(b)(6),(14)). Giving caregivers access to and the right to use the company's portal software is a transfer of prewritten software via "constructive possession" — the user gains the right to use, control or direct the software (citing TSB-A-08(62)S). So the monthly fee is taxable under Tax Law section 1105(a).
• Scales and tablets = taxable. Medical equipment is exempt (Tax Law section 1115(a)(3)) only if it is primarily and customarily used for medical purposes and not generally useful absent illness/injury (20 NYCRR 528.4(e)). Scales (people weigh themselves routinely) and tablets (used for many things; "the tablet without the product is just a tablet") are generally useful otherwise, so they are not exempt medical equipment — taxable when sold to consumers.
• Blood-pressure cuffs and glucometer transmitters = exempt medical equipment. Blood-pressure cuffs are recognized medical equipment (Publication 822), and the transmitter works only with a glucometer, so it is primarily/customarily medical and not generally useful absent illness — both are exempt under Tax Law section 1115(a)(3).
• Sales to an exempt organization = not taxable. Software or devices sold to an organization exempt under Tax Law section 1116(a) are not taxable; keep the invoice naming the exempt org and a completed Form ST-119.1.

What this means for you

Cloud/portal health software is taxable prewritten software

Charging for access to a hosted software portal — even framed as a monitoring "service" — is generally a taxable sale of prewritten software in New York, because the user gets constructive possession (the right to use and direct the software). Where the code runs does not matter.

"Medical equipment" is narrow

A device is exempt only if it is primarily/customarily medical and not generally useful without illness. Single-purpose medical items (blood-pressure cuffs, glucometer-only transmitters) qualify; general-purpose items (scales, tablets) do not, even when used in a health product.

Exempt-organization sales

Sales of the software or devices to a section 1116(a) exempt organization are exempt — document each with the invoice and Form ST-119.1.

Common questions

Q: We call it a monitoring service — why is the monthly fee taxed as software?
A: Because caregivers access and direct the company's portal software, gaining constructive possession of prewritten software. That is a taxable transfer regardless of the "service" label.

Q: Why are the scales and tablets taxable but the blood-pressure cuff exempt?
A: Scales and tablets are generally useful even without illness, so they are not exempt medical equipment. A blood-pressure cuff (and a glucometer-only transmitter) is primarily and customarily medical and not generally useful otherwise, so it is exempt.

Q: What if we sell to a nonprofit that helps disabled people?
A: Sales to an organization exempt under Tax Law section 1116(a) are not taxable; keep the invoice and a completed Form ST-119.1.

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 1105(a) (sales tax on retail sales of tangible personal property, including prewritten software)
• Tax Law section 1101(b)(6),(14) (prewritten software is tangible personal property)
• Tax Law section 1115(a)(3) (exemption for medical equipment)
• Tax Law section 1116(a) (exempt organizations)
• 20 NYCRR 528.4(e) (definition of medical equipment)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(8)S
Sales Tax
March 15, 2016

Office of Counsel

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S140903A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED
(hereinafter “Petitioner”). Petitioner asks whether its fee for its tablet-based health monitoring
product, and the health devices and tablets sold with the product, are subject to sales tax.
We conclude that (i) Petitioner’s fee for its tablet-based health monitoring product and
sale of scales and tablets are subject to sales tax unless they are sold to an exempt organization,
and (ii) Petitioner’s sale of blood pressure cuffs and transmitters for glucometers are not subject
to sales tax.
Facts
Petitioner sells a tablet-based monitoring product (“product”) that helps people with
chronic health conditions (“users”) live independently. The product involves a tablet that
communicates with Petitioner’s web portal wirelessly through the internet and one or more
wireless health monitoring devices (“equipment”), including a scale, blood pressure cuff, or
transmitter for a glucometer. The transmitter will only work with a glucometer and cannot be
used for any other purpose. Petitioner installs software on the tablet that causes the tablet to
function solely as a monitoring device.
The product enables a caregiver to support a user remotely by monitoring the user’s
health status and receiving alerts when problems arise. A caregiver, such as a family member,
will set up a care plan on Petitioner’s web portal that will connect to the tablet Petitioner
provides to the user. The care plan will provide support for medications, chronic health
conditions and daily activities, such as doctor appointments. For example, the tablet can be
programmed to prompt a diabetic to test his or her blood sugar at a certain time every day. The
results will be sent wirelessly from the glucometer transmitter to the tablet and from the tablet to
the caregiver, using Petitioner’s web portal. The caregiver will receive the information as a text
message. The tablet can also be programmed to remind the user to take his or her medications.
Petitioner purchases the equipment and then sells it to each client. The equipment is sold
directly to consumers, as well as to not-for-profit entities that assist developmentally disabled
people. Petitioner also charges a monthly fee for access to the product, which includes usage of
the system, technical support and caregiver access to Petitioner’s web portal. The monthly fee

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Sales Tax
March 15, 2016

for the product is charged separately from the charge for the equipment. When and if a customer
terminates use of Petitioner’s product, Petitioner remotely removes this software from the tablet,
and the tablet becomes an ordinary tablet.

Analysis
The Tax Law imposes sales tax on retail sales of tangible personal property, including
prewritten software, and enumerated services. See Tax Law §§ 1101(b)(6); 1105. “Sale” is
defined as “[a]ny transfer of title or possession or both, exchange or barter, rental, lease or
license to use or consume or otherwise, in any manner or by any means whatsoever for a
consideration, or any agreement therefor.” Tax Law § 1101(b)(5). Prewritten computer software
is computer software that is not designed and developed by the creator to the specifications of a
specific purchaser. Tax Law § 1101(b)(14). “Prewritten computer software is included within the
definition of tangible personal property, ‘regardless of the medium by means of which such
software is conveyed to the purchaser.’” TSB-A-08(62)S; Tax Law § 1101(b)(6).
Giving a client access and the right to use prewritten software constitutes the sale of
prewritten software, which is taxable under Tax Law § 1105(a). See TSB-A-15(25)S; TSB-A15(1)S; TSB-A-08(62)S. “The accessing of Petitioner’s software by Petitioner’s customers’
constitutes a transfer of possession of the software, because the customer gains constructive
possession of the software, and gains the ‘right to use, control or direct the use’ of the software.”
TSB-A-08(62)S. Here, Petitioner’s product allows caregivers access to its web portal where they
remotely use Petitioner’s software to create care plans for the users. Giving the caregivers access
to and the right to use prewritten software constitutes the transfer of prewritten software. See id.
Petitioner’s monthly fee for the product constitutes the sale of prewritten software and, therefore,
is subject to sales tax. See id.
Medical equipment, other than medical equipment purchased at retail for use in
performing medical and similar services for compensation, is exempt from sales and use tax
pursuant to Tax Law § 1115(a)(3). “Medical equipment means machinery, apparatus and other
devices . . . which are intended for use in the cure, mitigation, treatment or prevention of
illnesses or diseases or the correction or alleviation of physical incapacity in human beings.” 20
NYCRR § 528.4(e)(1). Equipment will qualify as medical equipment only if it is “primarily and
customarily used for medical purposes and [is] not [] generally useful in the absence of illness,
injury or physical incapacity.” 20 NYCRR § 528.4(e)(2).
Blood pressure cuffs previously have been determined to qualify as medical equipment.
See Publication 822, Taxable Status of Medical Equipment and Supplies, Prosthetic Devices, and
Related Items. Additionally, as the transmitters work only when used with glucometers, they are

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primarily and customarily used for medical purposes and are not generally useful in the absence
of illness, injury or physical incapacity. Therefore, the transmitters also are exempt from tax as
medical equipment. See 20 NYCRR § 528.4(e).
However, “not every device employed to remedy or lessen physical infirmity and
disability qualifies.” Craftmatic Comfort Mfg. Corp. v. New York State Tax Com’n, 118 AD2d
995, 998 (3d Dep’t 1986) (Yesawich, J., dissenting) rev’d 69 NY2d 755 (1987) (for reasons
stated in dissent). The regulation requiring that equipment not be generally useful for
nonmedical purposes prevents overextension of the exemption. See id. at 998.
Petitioner’s scales and tablets are generally useful in the absence of illness, injury or
physical incapacity. Scales are regularly used by consumers who do not suffer from any
incapacity to monitor their weight. Tablets are used for many purposes, including entertainment.
Here, the tablet without the product is just a tablet. Because scales and tablets are generally
useful for purposes other than treatment of illness, injury or physical incapacity, they do not
qualify for the exemption for medical equipment and supplies, and sales to consumers are subject
to tax. See TSB-A-12(15)S.
However, sales of equipment or prewritten software to an organization that is exempt
pursuant to Tax Law § 1116(a) are not subject to tax. See TSB-A-14(16)S. Petitioner’s records
for each sale to an exempt organization should include a copy of Petitioner’s invoice listing the
exempt organization as the purchaser and a copy of Form ST-119.1, Exempt Organization
Exempt Purchase Certificate, completed by the organization. See id.

DATED: March 15, 2016
/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

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.