What New York sales tax does a for-profit nursing home owe on the items it buys for residents — and does Medicaid or Medicare coverage change the answer?

Plain-English summary

A company operating for-profit nursing homes asked whether New York sales tax applies to everything it buys for residents who are covered by Medicaid and Medicare. The Office of Counsel walked through the categories and the answer is item-by-item — and, importantly, the resident's Medicaid or Medicare status doesn't matter to the taxability of what the home buys.

• Medical equipment and supplies bought to perform medical services for compensation: taxable (the § 1115(a)(3) exemption carves these out when bought for use in providing medical services).
• Toilet articles, bedding, and other general consumables: taxable tangible personal property.
• Food and food products: exempt under § 1115(a)(1). But if meals are prepared by a third party, the home is buying a taxable catering service.
• Drugs and medicines: exempt under § 1115(a)(3).
• Utilities (electricity, heat) for the residential facility: exempt from the State portion of sales tax under § 1105-A, but local sales tax still applies.
• Clothing and footwear under $110 (including adult diapers): exempt from State tax under § 1115(a)(30); local tax applies unless the county or city elected the exemption.

Because the home is a for-profit, non-exempt operator, it can't avoid tax on the taxable categories. A facility that is itself an exempt organization under § 1116(a) would be in a different position.

What this means for you

Nursing homes and long-term-care facilities

Budget for sales tax on durable medical equipment, supplies, bedding, and toiletries. Food, prescription drugs, and the State share of residential utilities come in tax-free, and resident-worn clothing under $110 is State-exempt. Watch the catering trap: outsourced meal prep is taxable even though raw food is exempt.

Anyone serving Medicaid/Medicare patients

Don't assume government payor status makes purchases exempt — it doesn't change the home's own sales/use tax on what it buys.

Accountants and tax professionals

Each category has its own hook: § 1115(a)(1) food, § 1115(a)(3) drugs vs. service-use medical equipment, § 1105-A State-only utility exemption, § 1115(a)(30) clothing with the § 1210 local option. An exempt-org determination under § 1116(a)(4) would change the whole picture.

Common questions

Q: Our residents are all on Medicaid/Medicare — doesn't that make our purchases exempt?
A: No. The payor's status has no bearing on the sales tax the for-profit facility owes on what it buys.

Q: Is the food we buy taxable?
A: Food and food products are exempt. But if a third party prepares the meals, you're buying a taxable catering service.

Q: What about electricity and heat?
A: A residential facility is exempt from the State portion of sales tax on those utilities, but local sales tax still applies.

Q: Are adult diapers taxable?
A: They're treated as clothing under $110, so they're exempt from State tax; local tax applies unless your county or city adopted the clothing exemption.

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), (d) (sales tax on tangible personal property and on restaurant/catering food)
• Tax Law § 1115(a)(1) (food and food products exemption)
• Tax Law § 1115(a)(3) (drugs and medicines; medical equipment/supplies exemption and its limits)
• Tax Law § 1116(a)(4) (exempt organizations)
• Tax Law § 1105-A (residential energy exempt from State sales tax only)
• Tax Law § 1115(a)(30) (clothing and footwear under $110)
• Tax Law § 1210(a)(1)(i) (local option for the clothing exemption)
• 20 NYCRR 527.8(f), 528.4(a)(3); TSB-A-07(23)S; TSB-A-90(60)S; Publications 718-C, 718-R

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/a20-36s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(36)S
Sales Tax
July 21, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance (“the Department”) received a Petition for Advisory
Opinion from [ REDACTED ] (hereinafter “Petitioner”). Petitioner asks whether New York State and
local sales tax applies to all items purchased by nursing homes or long term care facilities located in New
York and consumed exclusively by residents covered under Medicaid and Medicare.
We conclude that New York State and local sales tax applies to medical equipment and supplies
and other consumable items, such as toilet articles and bedding, purchased by a nursing home or long
term care facility, unless such facility is an exempt organization pursuant to Tax Law § 1116(a),
regardless of the payment status of the patient consuming the items. However, food and food products
purchased by a nursing home or long term care facility for its patients are exempt pursuant to Tax Law §
1115(a)(1) and drugs or medicine purchased by a nursing home or long term care facility for its patients
are exempt pursuant to Tax Law § 1115(a)(3). Nursing homes and long term care facilities are also
exempt from the State portion of sales tax due on the purchase of utilities used in the facility pursuant to
Tax Law § 1105-A. However, such facilities will still be subject to any local sales tax imposed on the
purchase of utilities.
Facts
Petitioner operates for-profit nursing homes in several states. Petitioner purchases consumable
items, such as food, food products, drugs or medicine, medical equipment, toilet articles, bedding,
laundry, utilities, and general medical supplies that are paid for and used exclusively by patients covered
by Medicaid and Medicare. When Petitioner makes purchases for its Medicaid and Medicare recipients,
the supplier will send Petitioner a bill. Petitioner then sends a bill to Medicaid or Medicare for each
patient, but that bill is not itemized by type of consumable item.
Analysis
Sales tax is imposed on the sale, except for resale, of tangible personal property, except as
otherwise provided by Article 28 of the Tax Law. See Tax Law § 1105(a). Generally, when sold for
human consumption, food products, except for candy and confectionary and certain beverages (e.g., soft
drinks, beverages with less than 70% natural fruit juice), are exempt from sales tax. See Tax Law §§
1105(d), 1115(a)(1). Accordingly, aside from the exceptions stated above, the purchase of food by
nursing homes for provision to residents in New York State is exempt from sales tax. However, if meals
are prepared by a third party, the nursing home would be purchasing a catering service and such charge
would be subject to tax. See Tax Law § 1105(d); 20 NYCRR § 527.8(f).
Tax Law § 1115(a)(3) provides as follows:
Drugs and medicines intended for use, internally or externally, in the cure,
mitigation, treatment or prevention of illnesses or diseases in human beings, medical

-2-

TSB-A-20(36)S
Sales Tax
July 21, 2020

equipment (including component parts thereof) and supplies required for such use or to
correct or alleviate physical incapacity, and products consumed by humans for the
preservation of health but not including cosmetics or toilet articles notwithstanding the
presence of medicinal ingredients therein or medical equipment (including component
parts thereof) and supplies, other than such drugs and medicines, purchased at retail for
use in performing medical and similar services for compensation.
Accordingly, the purchase of drugs and medicine are exempt from sales and use tax. See Tax Law §
1115(a)(3); 20 NYCRR § 528.4(a)(3). However, medical equipment and supplies purchased at retail for
use in performing medical services for compensation are not exempt. See id.
“A nursing home is a facility that is engaged in providing medical or similar services for compensation.”
TSB-A-07(23)S. Therefore, unless the nursing home is an exempt organization under Tax Law §
1116(a)(4), purchases of medical equipment and supplies are not exempt from sales tax.
Additionally, the other items listed by Petitioner, including toilet articles and bedding, do not
qualify for an exemption and are tangible personal property subject to tax pursuant to Tax Law § 1105(a).
However, to the extent a nursing home buys clothing and footwear for patients (including adult diapers),
such items are tax exempt pursuant to Tax Law § 1115(a)(30), if the receipt is less than $110 per article of
clothing or pair of shoes. This exemption does not apply to the imposition of local sales and use tax
unless the county or city in which the sale occurs elected this exemption. See Tax Law § 1210(a)(1)(i);
TSB-A-07(23)S; Sales and Use Tax Rates on Clothing and Footwear, Publication 718-C.
Tax Law § 1105-A provides that receipts from retail sales made on and after October first,
nineteen hundred eighty, of fuel oil, coal, wood, propane (except when sold in containers of less than one
hundred pounds), natural gas, electricity, steam and gas purchased for residential purposes, are not subject
to State sales tax due pursuant to Tax Law § 1105(a) and (b). Because a nursing home is residential in
nature, its purchase of utilities, such as electricity and heat, are exempt from State sales and use tax. See
TSB-A-90(60)S. However, Tax Law § 1105-A does not affect the imposition of local sales and use tax
on such purchases. See Local Sales and Use Tax Rates on Residential Energy, Publication 718-R.
Finally, as noted above, the patient’s status as a Medicaid or Medicare recipient has no bearing on
the taxability of the purchases made by the for-profit nursing home or long term care facility.
DATED: July 21, 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.