Can a dentist buy a CEREC milling machine tax-free under New York's production-machinery exemption because it fabricates crowns and other dental devices?

Plain-English summary

A dentist bought a Sirona CEREC milling machine to fabricate crowns, inlays, onlays, veneers, and other restoration devices chairside. He asked whether the machine qualified for New York's exemption for production machinery — the exemption for equipment used directly and predominantly to produce tangible personal property for sale by manufacturing or processing.

The Office of Counsel said no — the machine is taxable. The machine does fabricate tangible personal property (crowns, dentures, veneers, etc., are all tangible personal property). But the exemption only applies when you produce property for sale, and this dentist is not in the business of selling dental devices separately. He fabricates the devices and then uses or consumes them in providing dental services — a professional service. The transfer of the device to the patient is "part and parcel" of rendering that service, not a sale of property. Because the dentist is not producing property for sale, the §§ 1105-B and 1115(a)(12) exemptions don't apply, and his purchase of the machine is taxable.

What this means for you

Dentists, orthodontists, and dental labs

A chairside fabrication machine you use to make devices for your own patients as part of your treatment is taxable — you're providing a service, not manufacturing for sale. A standalone dental laboratory that actually sells finished devices to dentists is in a different position and may be able to claim the production-machinery exemption.

Other professionals who fabricate things they then use in a service

The same logic reaches opticians, medical providers, and similar professionals: if the item you make is consumed in rendering your service rather than sold as property, machinery to make it generally isn't exempt (Southern Tier Iron Works; Butler; Greene & Kellogg).

Accountants and tax professionals

The dividing line is "production for sale" vs. "use/consumption in performing a service." Selling the finished property as such is what unlocks §§ 1105-B / 1115(a)(12); embedding it in a professional service does not.

Common questions

Q: But the machine clearly makes a physical product — why no exemption?
A: The exemption requires producing property for sale. The dentist uses the crowns and veneers in treating his own patients, so he isn't selling property; he's providing a dental service.

Q: Would a commercial dental lab get the exemption?
A: Potentially yes — a lab that actually sells the finished devices is producing tangible personal property for sale, which is the situation the exemption targets. This opinion is about a treating dentist.

Q: Does it matter that crowns and dentures are tax-exempt prosthetic devices?
A: No. That a finished device might be exempt when sold doesn't make the machine exempt; the machine exemption turns on whether the buyer produces property for sale.

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) (sales tax on retail sales of tangible personal property)
• Tax Law § 1101(b)(6) (definition of tangible personal property)
• Tax Law § 1115(a)(12) (exemption for machinery used directly and predominantly to produce tangible personal property for sale)
• Tax Law § 1105-B(a) (exemption for parts, tools, and supplies used in production for sale)
• Tax Law § 1115(a)(4) (prosthetic aids and devices)
• 20 NYCRR 528.5(b)(1); TSB-M-06(5)S (prosthetic dental devices)
• Southern Tier Iron Works v. Tully, 66 AD2d 921 (3d Dep't 1978); Midland Asphalt Corp. v. Chu, 136 AD2d 851 (3d Dep't 1988)
• Butler v. State Tax Commission, 131 AD2d 953 (3d Dep't 1987); Greene & Kellogg, Inc. v. Chu, 134 AD2d 755 (3d Dep't 1987)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-35s.pdf

Original ruling text

1

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(35)S
Sales Tax
July 14, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (Petitioner). The petitioner requests guidance on whether the receipt from his purchase
of a milling machine from a dental supplier is exempt from sales tax pursuant to Tax Law §§ 1105-B
and 1115(a)(12). We conclude that the receipt is not exempt from sales tax because he is using or
consuming fabricated dental devices in the sale of dentistry services, rather than producing tangible
personal property for sale.
Facts
The petitioner is a dentist who is purchasing a Sirona Cerec Milling Machine for the fabrication
of crowns, inlays, onlays, and veneers. The machine also has the capability to mill dental implant
abutments, dental bridges and other restoration devices such as dental bars and bridge telescopes.
Dental bars are devices used to secure dentures for wear. Bridge telescopes are devices used to ensure
even distribution of force across a dental bridge.
Analysis
Tax Law § 1105(a) imposes sales tax on the receipts from every retail sale of tangible personal
property. Tax Law § 1101(b)(6) defines tangible personal property as corporeal personal property of
any nature. The milling machine is itself tangible personal property. Accordingly, petitioner’s purchase
of the machine would be subject to taxation in the absence of an applicable exemption.
Tax Law § 1115(a)(12) exempts from tax all machinery or equipment for use or consumption
directly and predominantly in the production of tangible personal property for sale, by manufacturing,
processing, generating, assembling, refining, mining or extracting, but not including parts with a useful
life of one year or less or tools or supplies used in connection with such machinery or equipment. Tax
Law § 1105-B(a) exempts from tax parts with a useful life of one year or less, and tools or supplies for
use or consumption directly and predominantly in the production of tangible personal property for sale.
Here, the milling machine fabricates tangible personal property. The machine fabricates
prosthetic dental devices, which are devices that completely or partially replace missing teeth or the
functions of permanently inoperative or permanently malfunctioning teeth. See Tax Law § 1115(a)(4);
20 NYCRR 528.5(b)(1). Prosthetic dental devices, which include implants, dentures, bridges, full and
partial crowns (both temporary and permanent), onlays, and inlays, are tangible personal property. See
TSB-M-06(5)S. The machine also fabricates non-prosthetic devices, such as veneers, decorative caps or
jewelry teeth, which are also tangible personal property. See Tax Law § 1101(b)(6).

-2-

TSB-A-20(35)S
Sales Tax
July 14, 2020

However, the petitioner is not producing tangible personal property for sale within the meaning
of Tax Law §§ 1105-B and 1115(a)(12) because he is not in the business of selling dental devices
separately from his services. See Southern Tier Iron Works v. Tully, Jr., 66 AD2d 921 (3d Dep’t 1978);
Midland Asphalt Corp. v. Chu, 136 AD2d 851 (3d Dep’t 1988). Rather, the petitioner’s sales are more
properly characterized as sales of a professional service and not sales of tangible personal property.
Though the dental devices constitute tangible personal property that is provided to patients, the transfer
of tangible personal property (the dental devices) is part and parcel of the rendering of dental services.
See Butler v. State Tax Commission, 131 AD2d 953 (3d Dep’t 1987); Greene & Kellogg, Inc. v. Chu,
134 AD2d 755 (3d Dep’t 1987). In other words, the dentist is fabricating the dental devices for use or
consumption in rendering dental services. The petitioner is not making a sale of tangible personal
property.
Accordingly, the receipt from the purchase of the Sirona Cerec Milling Machine is subject to
tax and is not exempted from sales tax pursuant to Tax Law §§ 1105-B and 1115(a)(12). The Tax Law
§§ 1105-B and 1115(a)(12) exemptions do not apply because the dentist is not engaged in producing
tangible personal property for sale within the meaning of the Tax Law, but is instead using or
consuming the fabricated dental devices in the sale of dentistry services.
DATED: July 14, 2020

/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.