Are feeding pumps and tubes prosthetic aids or taxable medical supplies, and must an out-of-state mail-order seller collect New York tax?

Plain-English summary

Biosearch Medical Products, Inc., a New Jersey company, sells Nose Gastric Tubes, food bags, plastic tubes, and feeding pumps — to distributors for resale and directly to hospitals and nursing homes. Orders are taken by phone and accepted in New Jersey, then shipped into New York by common carrier. Biosearch has no New York office or resident salesperson, but its representatives or out-of-state employees occasionally travel to New York to solicit business or provide product education. It asked (1) whether its products are tax-exempt prosthetic aids, and (2) whether it is a "vendor" that must collect New York sales tax.

1. Medical equipment/supplies, not prosthetic aids. New York has two relevant exemptions:

• § 1115(a)(4) fully exempts prosthetic aids, hearing aids, eyeglasses, and artificial devices that correct or alleviate physical incapacity.
• § 1115(a)(3) covers drugs, medicines, medical equipment, and supplies — but it is not a total exemption.

The Department classified the feeding pumps as "medical equipment" and the tubes and bags as "supplies" under paragraph (3), not prosthetic aids under (4). Because paragraph (3) is conditional, when these items are sold to someone who buys them at retail to perform medical or similar services for compensation, the seller must collect the tax. If instead the sale is to a § 1116(a) exempt organization (such as a hospital or nursing home), no tax is due and the seller should take the exemption certificate.

2. Sufficient nexus — Biosearch must collect. A state can require an out-of-state seller to collect its tax only if there is a sufficient nexus under the Commerce Clause and Due Process Clause (National Geographic Society v. California Board of Equalization; National Bellas Hess). The test is a "definite link, some minimum connection" between the state and the seller. The Department found Biosearch's New York contacts were "not slight and inconsequential": it sends promotional materials into New York to solicit orders, and its representatives/employees travel to New York to solicit business and provide product education. That satisfied nexus, so Biosearch is a "vendor" under § 1101(b)(8)(i)(C) and § 526.10 and must collect New York sales tax on its retail mail-order sales to New York customers, unless the customer is otherwise exempt.

What this means for you

"Prosthetic aid" is narrow; most durable equipment falls under the conditional exemption

The fully-exempt category in § 1115(a)(4) is for prosthetic and artificial devices. General medical equipment and supplies — even life-sustaining items like feeding pumps and tubes — fall under § 1115(a)(3), which is only conditionally exempt. When such items are bought at retail by a provider furnishing medical services for compensation, tax applies; the clean exemption comes from selling to an exempt hospital or nursing home with a certificate.

Selling into New York can create a collection duty even without an office

This opinion is a product of the physical-presence era: Biosearch had no New York location, but its in-state solicitation and visits by its representatives were enough to require collection. Important: the nexus rules have since changed dramatically. After South Dakota v. Wayfair and New York's economic-nexus thresholds, an out-of-state seller can be required to collect based on sales volume alone, with no physical presence. Treat the specific nexus reasoning here as historical and check current law.

Common questions

Q: Are feeding pumps exempt as prosthetic aids?
A: No. They are "medical equipment" under § 1115(a)(3), and the related tubes and bags are "supplies" under the same paragraph — a conditional exemption, not the full prosthetic-aid exemption in § 1115(a)(4).

Q: When is a sale of these items taxable versus exempt?
A: Taxable when sold to a buyer purchasing at retail to perform medical services for compensation; exempt when sold to a § 1116(a) organization (hospital/nursing home) with a proper exemption certificate.

Q: Did an out-of-state company with no New York office have to collect tax?
A: Yes, on these 1990 facts — its in-state solicitation and representative visits created nexus. But nexus law has since changed (Wayfair and economic-nexus rules), so verify the current standard.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(3) — conditional exemption for drugs, medicines, medical equipment, and supplies
• Tax Law § 1115(a)(4) — total exemption for prosthetic aids, hearing aids, eyeglasses, and artificial devices
• Tax Law § 1101(b)(8) — definition of "vendor," including a person soliciting business through representatives
• Tax Law § 1131(1) — persons required to collect tax
• 20 NYCRR § 526.10 — vendor; soliciting business; interstate vendors

Cited authority:

• National Geographic Society v. California Board of Equalization, 430 U.S. 551
• National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753
• Miller Bros. v. Maryland, 347 U.S. 340

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_49s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90(49)S
Sales Tax
October 22, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S900514A

On May 14, 1990, a Petition for Advisory Opinion was received from Biosearch Medical
Products, Inc., 35 Industrial Parkway, P.O. Box 1700, Somerville, New Jersey 08876.
The issues raised by Petitioner, Biosearch Medical Products, Inc., are:
1)
Whether the products sold by Petitioner are prosthetic aids, exempt from the
imposition of sales tax pursuant to Section 1115(4) of the Tax Law.
2)
Whether Petitioner is a "vendor" for the purposes of New York State sales tax and
therefore is required to collect said tax on retail mail order sales made to New York customers.
Petitioner sells Nose Gastric Tubes, food bags, plastic tubes, and feeding pumps. The
products are sold to distributors for resale or sold directly to hospitals and nursing homes. Orders are
taken by phone and accepted in New Jersey. The products are shipped into New York using a
common carrier. Petitioner has no sales person residing in New York or offices within New York.
However, from time to time representatives or out of state employees may travel to New York for
the purposes of soliciting business or product education.
Section 1115 of the Tax Law contains the following two exemptions which pertain to
Petitioner's products.
(3) Drugs and medicines intended for use, internally or externally, in the cure,
mitigation, treatment or prevention of illnesses or diseases in human beings, medical
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. (Emphasis supplied)
(4) Prosthetic aids, hearing aids, eyeglasses and artificial devices and component
parts thereof purchased to correct or alleviate physical incapacity in human beings.
Petitioner's feeding pumps are medical equipment as described in paragraph "(3)" and not
prosthetic aids as described in paragraph "(4)". Likewise, those items used in conjunction with the
feeding pumps such as Nose Gastric Tubes, food bags and plastic tubes are supplies within the
meaning of paragraph "(3)".

TP-9 (9/88)

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Sales Tax
October 22, 1990

Paragraph "(3)" is not a total exemption. Therefore, when a vendor sells products which are
described in this paragraph to someone who purchased the products at retail for use in performing
medical and similar services for compensation, the vendor must collect the sales tax due from the
purchaser. However if the sale is to an organization exempt under Section 1116(a) of the Tax Law
then no sales tax would be due. In such a case the vendor should obtain the appropriate exemption
certificate from the purchaser.
Under Article 28 of the Tax Law every person who makes retail sales of tangible personal
property in New York (which includes sales where the property is delivered to the customer in New
York) is required to register with the Commissioner of Taxation and Finance and to collect the sales
tax due with respect to such sales.
Section 1101(b)(8) of the Tax Law provides in part:
(i) The term "vendor" includes:
*

*

*

(C) A person who solicits business either:
(I) by employees, independent contractors, agents or other
representatives; or
Section 526.10 of the Sales and Use Tax Regulations provides in part:
(a) Persons included. The term "vendor" includes: (1) (i) A person making sales of tangible
personal property or services, the receipts of which are subject to tax.
*

*

*

(3) A person who solicits business either by or through employees, independent
contractors, agents or other representatives or by distribution of catalogs or other advertising
matter and by reason thereof makes sales to persons within the State of tangible personal
property or services the use of which is taxed. See subdivision (e) of this section.
*

*

*

(d) Soliciting business. (1) A person is deemed to be soliciting business if he has
employees, salesmen, independent contractors, promotion men, missionary men, service
representatives or agents soliciting potential customers in the State.
*

*

*

(e) Interstate vendors. (1) A person outside of this State making sales to persons within the
State, who solicits the sales in New York, as defined in subdivision (d) of this section, or
who maintains a place of business as defined in subdivision (c) of this section, is required

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TSB-A-90(49)S
Sales Tax
October 22, 1990

to collect the sales tax on the tangible personal property delivered in New York or the
services performed in New York.
Section 1131(1) of the Tax Law provides in part that "'persons required to collect any tax
imposed by this article' . . . shall include: every vendor of tangible personal property or services; .
. ."
Section 1131(4) of the Tax Law provides in part that "'Property and services the use of which
is subject to tax' shall include: (a) all property sold to a person within the state, whether or not the
sale is made within the state, . . ."
Section 1134(a)(1) of the Tax Law further provides in part that "Every person required to
collect any tax imposed by this article . . . commencing business, or opening a new place of business,
. . .shall file with the commissioner of taxation and finance a certificate of registration, in a form
prescribed by him, at least twenty days prior to commencing business. . . ."
A state can require an out of state seller to collect the state's sales and use tax only when there
is a sufficient nexus between the seller and the taxing state, as required by the commerce clause (Art.
I, §8, cl. 3) and the due process clause of the Fourteenth Amendment. National Geographic v.
California Equalization Board, 430 U.S. 551.
In most general terms, the due process clause requires that there be some minimum
relationship between the taxpayer or collector and the taxing state that provides a taxable "nexus".
The commerce clause, on the other hand, mandates that there must not be an unreasonable burden
on the free flow of goods across state lines. Rowe-Genereux, Inc. v. Vermont Department of Taxes,
411 A. 2d 1345 (1980). The test whether a particular state exaction is such as to invade the exclusive
authority of Congress to regulate trade between the States, and the test for a state's compliance with
the requirements of due process in this area, are similar. National Bellas Hess, Inc. v. Department
of Revenue, 386 US 753.
"The relevant constitutional test to establish the requisite nexus for requiring an out of state
seller to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's
activities carried on within the State, but simply whether the facts demonstrate some definite link,
some minimum connection, between [the State and] the person it seeks to tax: National Geographic
Society v. California Board of Equalization, 430 US 551, (quoting Miller Bros. v. Maryland, 347 US
at 344-345. (Emphasis added). The basic question is "whether the state has given anything for which
it can ask in return." National Bellas Hess, Inc. v. Illinois Rev. Dept., 386 U.S. 753, 756 (quoting
Wisconsin v. J.C. Penney Co., 311 US 435, 444).
Petitioner's contacts with New York State are not slight and inconsequential. Promotional
materials are sent into New York State for the purpose of soliciting orders and stimulating sales.
Representatives or out of state employees of Petitioner travel to New York for the purpose of
soliciting business or for product education.

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Sales Tax
October 22, 1990

In consideration of the numerous contacts with and benefits derived from carrying on
business in New York State, it is evident a sufficient nexus exists between Petitioner and the state.
The existence of this nexus satisfies the requirements of the commerce clause and due process
clause, thereby making the requirement to collect the sales and use taxes constitutional.
Furthermore inasmuch as Petitioner has representatives or out of state employees soliciting
potential customers in New York State and providing product education, Petitioner falls within the
definition of a "vendor" as defined in Section 1101(b)(8)(i)(C)(I) of the Tax Law and Section
526.10(a)(1)(i), (a)(3), (d)(1) and (e)(1) of the Sales and Use Tax Regulations.
Accordingly Petitioner is required to collect New York State sales tax on its retail mail order
sales made to customers in New York, unless such customers are otherwise exempt for the payment
of said tax.

DATED: October 22, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.