Is providing non-transplantable human tissue to medical facilities and labs for research and training subject to New York sales tax?

Plain-English summary

A company operates a non-transplantable human tissue bank. It receives donated human bodies (with legal consent, no payment to families), then processes, tests, preserves, stores, prepares, and ships tissue specimens — or whole cadavers — to hospitals, universities, medical-training organizations, and device manufacturers for research and training. It asked how the consideration it receives is taxed.

The Office of Counsel concluded it's not taxable:

• Sales and use tax applies to retail sales of tangible personal property and to enumerated services (Tax Law § 1105(a)–(c)).
• Under New York law, "there is no right of property in a dead body . . . in the commercial sense" (Finley v. Atlantic Transport Co.). So transferring a tissue specimen is not a sale of tangible personal property.
• What the company actually does is perform a service — the removal, transportation, processing, preservation, and storage of human tissue. Because that service is not among the enumerated taxable services, the consideration it receives is not subject to sales tax.

What this means for you

Tissue banks, anatomical-donation programs, and biorepositories

Furnishing human tissue/cadaveric specimens for research and training is treated as a non-taxable service, not a sale of goods — because a dead body isn't "property in the commercial sense." The processing/preservation/shipping that goes with it is part of that non-taxable service.

The reasoning is narrow

The result rests specifically on the no-commercial-property-in-a-body doctrine and on the activity being a service not on New York's taxable list. Don't extend it to ordinary tangible goods.

Buyers (research institutions, device makers)

Charges for receiving non-transplantable human tissue specimens for research/training aren't taxable purchases.

Common questions

Q: The tissue bank ships a physical specimen — why isn't that a taxable sale of property? A: Because New York recognizes no property right in a dead body in the commercial sense, so the transfer isn't a sale of tangible personal property; it's a non-taxable service.

Q: Does the processing, preservation, and shipping change the answer? A: No. Those steps are part of the non-taxable service of removing, transporting, processing, preserving, and storing the tissue.

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 § 1105(a), (b), (c) (imposition of sales and use tax on property and enumerated services)
• Finley v. Atlantic Transport Co., 220 NY 249 (1917) (no property right in a dead body in the commercial sense)

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_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(23)S
Sales Tax
December 28, 2017

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

PETITION NO. S160729A

The Department of Taxation and Finance received a Petition for Advisory Opinion from Redact redact redact redact redact redact redact redact redact redact redact redact redact redact re Petitioner asks about the proper sales tax treatment of the consideration it receives for providing non-transplantable human tissue to medical facilities and laboratories for use in medical research and training. We conclude that such sales are not subject to State and local sales and use tax. Facts Petitioner operates a non-transplantable human tissue bank that provides services associated with the processing, storage, preparation and transportation of tissue specimen to clients for medical research and training purposes. Petitioner’s customers include medical facilities, hospitals, universities, academic medical centers, medical training organizations and medical device manufacturers, among others. Petitioner receives donated human bodies shortly after the time of death in order to provide such customers with either complete, intact cadavers, or portions of human tissue according to its customers' specific needs associated with their training and research requirements. Petitioner makes no payments to a donor's estate or the donor’s family for the donated remains. These donations are subject to legal consent and authorization from the donors and/or their next of kin. By donating to Petitioner, donors and their families are able to meet their own or loved ones' wishes to help support and further the advancement of scientific and medical research. Petitioner’s transfer of a specimen to its customers involves the following steps. First, Petitioner must acquire the tissue specimen. This involves increasing public awareness of the services provided by Petitioner through the whole body donation process, developing contacts and relationships at hospitals, hospices and funeral homes, and preparing the necessary legal documents in order to conform to state laws related to whole body donation. Second, Petitioner must preserve the tissue specimen. After the donation has occurred, Petitioner must arrange for the transportation of the body to one of its intake facilities. At that point shortly after the time of death, a number of tests must be conducted on the body to ensure that the tissue is safe and suitable for use by Petitioner’s clients. From the time of death until the tissue is requested and supplied, proper storage, handling and preparation of the body is required. Services related to this storage and preparation process include embalming, latex injection, cold storage or flash freezing, suturing and formalin fixing. This process is critical in order to maintain the viability of any tissue for use by Petitioner’s clients in their medical studies and test

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TSB-A-17(23)S
Sales Tax
December 28, 2017

procedures. As a final part of this step, Petitioner’s highly trained laboratory technicians prepare requested tissue to meet customer specifications. Third, Petitioner must prepare the requested tissue specimen for delivery and transport it. This process includes the documentation of the tissue request from the medical agency, possible thawing of specific tissue related to that request, separation of a particular body part, testing of the tissue for suitability and then the shipment and/or delivery of that specific tissue to the customer. Shipment is done via vacuum sealed containers, dry ice and other similar provisions to ensure the preservation and security of the tissue in transit. Analysis The Tax Law imposes sales and use tax on retail sales of tangible personal property and the sale, except for resale, of certain enumerated services. See Tax Law § 1105(a), (b), and (c). Under New York law, “there is no right of property in a dead body . . . in the commercial sense.” Finley v. Atl. Transp. Co., 220 NY 249, 255 (1917). Accordingly, in transferring a tissue specimen to a medical facility or laboratory for medical research and training purposes, Petitioner is not making a sale of tangible personal property. Rather, it is performing a service, which involves removal, transportation, processing, preservation and storage of a human organ. Because this service is not one of the services made subject to sales tax, the consideration Petitioner receives for this service is not subject to sales tax.

DATED: December 28, 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.