NY TSB-A-17(11)S Sales Tax 2017-07-26

Is a permanent prostate implant that treats BPH a tax-exempt prosthetic aid in New York?

Short answer: Yes. The product is a permanent adjustable transprostatic implant, sold with its single-use delivery housing as one indivisible unit, used to treat Benign Prostatic Hyperplasia (BPH) by partially replacing the function of the malfunctioning urethra. Tax Law section 1115(a)(4) exempts prosthetic aids and their component parts purchased to correct or alleviate physical incapacity, and a prosthetic aid is property that completely or partially replaces a missing or permanently malfunctioning body part or its function and is not generally useful absent illness or injury. The implant and its housing meet that test, so they are exempt. Replacement parts are also exempt if clearly identified as such.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A medical-device maker asked whether its product — a permanent adjustable transprostatic implant used to treat Benign Prostatic Hyperplasia (BPH), an enlarged prostate that deforms the urethra and obstructs urine flow — qualifies as a prosthetic aid. The implant is placed during a procedure and is sold to hospitals and medical facilities together with a single-use delivery housing as one indivisible unit (the FDA approved them to be used together); the separate urethroscope is not part of the product.

The Office of Counsel concluded the product is an exempt prosthetic aid:

Tax Law section 1115(a)(4) exempts prosthetic aids and their component parts purchased to correct or alleviate physical incapacity.
A prosthetic aid (20 NYCRR 528.5(b)(1)) is property that 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 that purpose, and is not generally useful absent illness, injury, or incapacity.
The implant is placed permanently to partially replace the function of the urethra impaired by BPH. So the product and its component parts (the implant and its housing, sold as an indivisible unit for a single price) are prosthetic aids and exempt.
Replacement parts are also exempt if Petitioner clearly identifies them as such (20 NYCRR 528.5(c)(1)).

What this means for you

Device makers and medical suppliers

A device can be an exempt prosthetic aid even if it doesnt look like a classic prosthesis — what matters is whether it replaces a body part or its function and is useless to a healthy person. Treating a permanent malfunction by restoring function can qualify.

Indivisible units sold for one price

When a qualifying implant and its delivery components are sold together as one indivisible unit for a single price, the whole unit is treated as the prosthetic aid (the opinion cites TSB-A-14(11)S). A separately sold instrument (the urethroscope here) is not part of that exempt unit.

Label your replacement parts

Replacement parts ride along with the exemption only if you clearly identify them as replacement parts for the device.

Common questions

Q: Why is an implant that treats an enlarged prostate a prosthetic aid?
A: Because it is permanently implanted to partially replace the function of the urethra, which is permanently malfunctioning due to BPH — that fits the regulatory definition of a prosthetic aid.

Q: Is the delivery housing taxable since it is single-use?
A: No. The implant and housing are sold together as one indivisible unit for a single price, so the whole unit qualifies as the prosthetic aid.

Q: Are replacement parts exempt too?
A: Yes, provided they are clearly identified as replacement parts for the product.

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), (c) (tax on tangible personal property and enumerated services)
Tax Law section 1115(a)(4) (exemption for prosthetic aids and their component parts)
20 NYCRR 528.5 (what qualifies as a prosthetic aid; replacement parts)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2017.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a17_11s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(11)S
Sales Tax
July 26, 2017

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

PETITION NO. S151130A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED (“Petitioner”). Petitioner asks whether its product, REDACTED REDACTED, its
components, (collectively the “Product”), and their replacement parts are considered to be
prosthetic aids.
We conclude that the Product, its components and replacement parts clearly labeled as such
are all considered prosthetic aids and, therefore, are exempt from sales tax.
Facts
The Product is designed to correct a physical deformity in the male urinary tract known as
Benign Prostatic Hyperplasia (“BPH”). BPH involves hyperplasia (an increase in the number of
cells) of certain cells in the prostate gland that surrounds the urethra. This may lead to
deformation of the urethra and an increased resistance to the flow of urine from the bladder, which
slows the urination process and, in some cases, causes pain.
The Product corrects this deformation with permanent adjustable transprostatic implants
placed by a health care provider during a cystourethroscopy. Each permanent adjustable
transprostatic implant is sold to hospital or medical facilities in its own sterile, individual housing,
which is designed to couple to a urethroscope. The housing is single use; it is not reloadable or
reusable.
The housing includes a handle for positioning the implant and coupling it to the
urethroscope, a retractable needle for puncturing the capsule of the prostate gland, and a tensioning
spring with the handle for allowing adjustment of the implant during placement. The transprostatic
implant is a permanent implant made up of standard surgical implantable materials: a nitinol
capsular tab, a stainless steel urethral tab, and polyester suture that connects the two tabs.
Together, the permanent adjustable transprostatic implant and its housing form the Product.
The Product is sold to hospitals and medical facilities to correct a physical deformity and
must be prescribed by a physician. The implant and its housing are sold together as an indivisible
unit. The urethroscope is sold separately and is not included in the Product. The Food and Drug
Administration approved the implant and housing to be used together as an indivisible unit.

-2-

TSB-A-17(11)S
Sales Tax
July 26, 2017

Analysis
Retail sales of tangible personal property, except where otherwise exempted or excluded,
and certain enumerated services are subject to sales tax. See Tax Law § 1105(a) (c). As relevant
here, Tax Law § 1115(a)(4) exempts prosthetic aids and their component parts from the tax
imposed by Tax Law § 1105(a) to the extent that they are purchased to correct or alleviate physical
incapacity in human beings. Sales Tax Regulation 20 NYCRR 528.5(b)(1) qualifies what is
considered to be prosthetic aids:
[t]he 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 Product is used for the treatment of a permanently malfunctioning male urinary tract
caused by BPH. The Product is implanted permanently into the male urinary tract to partially
replace the function of the urethra. Accordingly, the Product and the associated component parts
(the permanent adjustable transprostatic implant and its housing) are prosthetic aids and are not
subject to tax. See Tax Law § 1115(a)(4); 20 NYCRR 528.5; TSB-A-09(16)S (skin matrix
product that replaces the patient’s skin or the function of the skin held to be a prosthetic aid); TSBA-14(11)S (indivisible component parts sold for a single price and not sold separately both qualify
as part of the same prosthetic aid).
Finally, provided Petitioner clearly identifies any and all replacement parts for the Product
as such, they will be exempt from sales tax. See 20 NYCRR 528.5(c)(1).

DATED: July 26, 2017

/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.