Are single-use artificial kidneys used in dialysis exempt from New York sales tax?

Plain-English summary

Althin CD Medical, Inc., sells artificial kidneys — the single-use filters (dialyzers) used in hemodialysis. A patient with kidney failure must have their blood filtered three times a week; the artificial kidney does the filtering during each treatment and is then discarded. Althin asked whether sales of artificial kidneys are exempt as sales of artificial organs.

The Department answered that they are exempt — as medical equipment and supplies:

• Medical equipment under § 1115(a)(3). Tax Law § 1115(a)(3) exempts medical equipment and supplies, and Regulation § 528.4(e)(1) defines medical equipment as devices intended for use in the cure, mitigation, treatment, or prevention of illness, other than the prosthetic aids/artificial devices covered by § 1115(a)(4).
• Backed by published guidance, legislative history, and precedent. Publication 822 lists "hemodialysis equipment" as exempt "unless purchased for use in performing medical or similar services for compensation." The § 1115(a)(3) legislative history expressly names the dialysis machine as exempt medical equipment when purchased for an individual. And the Department had already held, in its earlier Althin CD Medical opinion (TSB-A-91(72)S), that a hemodialysis kidney machine and its disposable supplies are medical equipment, not a prosthetic aid.
• Result and carve-out. So artificial kidneys are exempt under § 1115(a)(3) — unless purchased at retail for use in performing medical and similar services for compensation. The Department also noted that sales to organizations exempt under § 1116(a) are exempt.

What this means for you

Disposable dialysis filters are exempt medical supplies

The single-use artificial kidney isn't taxed as ordinary tangible personal property; it's medical equipment/supplies under § 1115(a)(3). The fact that it's disposable and used once doesn't change that — the Department treats hemodialysis equipment and its disposable supplies the same way.

It's medical equipment, not a prosthetic device

The Department was careful to classify the artificial kidney as medical equipment under § 1115(a)(3), not as a prosthetic aid/artificial device under § 1115(a)(4). Both branches can lead to exemption, but they have different rules; getting the classification right matters when analyzing related items.

The "for compensation" carve-out is the catch

As with other medical equipment (compare TSB-A-92(19)S on ultrasound machines), the exemption does not apply when the item is "purchased at retail for use in performing medical and similar services for compensation." The exemption is aimed at relief for the individual patient; a provider buying equipment to deliver paid services may fall outside it. Watch who is buying and why.

Sales to exempt organizations

Separately, sales of artificial kidneys to § 1116(a) exempt organizations (such as qualifying hospitals) are exempt regardless.

Common questions

Q: Are artificial kidneys taxable in New York?
A: No. They're exempt as medical equipment and supplies under § 1115(a)(3), unless purchased at retail for use in performing medical services for compensation.

Q: Does it matter that the artificial kidney is used only once and thrown away?
A: No. The Department treats hemodialysis equipment and its disposable supplies alike as exempt medical equipment.

Q: Is it a prosthetic device?
A: No. The Department classified it as medical equipment under § 1115(a)(3), not as a prosthetic aid under § 1115(a)(4).

Q: When would the sale be taxable?
A: When the artificial kidney is purchased at retail for use in performing medical or similar services for compensation — that use is carved out of the exemption.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1115(a)(3) (exemption for drugs, medicines, medical equipment and supplies; retail-for-compensation carve-out)
• Sales and Use Tax Regulations § 528.4(e)(1) (definition of medical equipment, excluding § 1115(a)(4) prosthetic/artificial devices)
• Tax Law § 1116(a) (sales to exempt organizations)
• New York State Publication 822 (7/87) (Taxable Status of Medical Equipment and Supplies, Prosthetic Devices and Related Items), at 1 (hemodialysis equipment exempt)
• Legislative history, § 1115(a)(3) (Assembly mem., 1976 Legis. Ann., at 343; dialysis machine exempt when purchased for an individual)
• Althin CD Medical, Inc., Adv. Op. Comm. T&F, November 26, 1991, TSB-A-91(72)S (hemodialysis equipment and supplies are medical equipment, not a prosthetic aid)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_16s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-92 (16)S
Sales Tax
February 26, 1992

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK

COMMISSIONER OF TAXATION AND TAXATION
ADVISORY OPINION

PETITION NO. S911213A

On December 13, 1991, a Petition for Advisory Opinion was received from Althin CD
Medical, Inc., 14600 NW 60th Avenue, Miami Lakes, FL 33014.
The issue raised by Petitioner, Althin CD Medical, Inc., is whether sales of artificial kidneys
are exempt from sales and use taxes as sales of artificial organs.
A person afflicted with kidney failure must undergo filtration of his/her blood (dialysis
treatment) three times a week, otherwise death will occur within two weeks. The artificial kidney
replaces the kidney function of the person during the dialysis treatment. Each artificial kidney is used
a single time, and then disposed of.
A dialysis machine provides the power to pump a patient's blood for filtration through the
artificial kidney, the same way the human heart pumps a person's blood through normal, functioning
kidneys for filtration. In the human body, the kidneys provide no pumping action. The operation of
a dialysis machine and an artificial kidney, are as interrelated as the operation of the human heart and
human kidneys. Their functions are as distinct as the aforementioned natural organs.
Section 1115(a) of the Tax Law, as amended September 1, 1976, provides as follows:
Sec. 1115. Exemptions from sales and use taxes.--(a) Receipts from the
following shall be exempt from the tax on retail sales imposed under subdivision (a)
of section eleven hundred five and the compensating use tax imposed under section
eleven hundred ten:
*

*

*

(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 added)

-2­
TSB-A-92 (16)S
Sales Tax
February 26, 1992
Section 528.4(e)(1) of the Sales and Use Tax Regulations defines the term "medical
equipment" to mean:
(e) Medical equipment. (1) Medical equipment means machinery, apparatus
and other devices (other than prosthetic aids, hearing aids, eye glasses and artificial
devices which qualify for exemption under section 1115(a)(4) of the Tax Law),
which are intended for use in the cure, mitigation, treatment or prevention of illnesses
or diseases or the correction or alleviation of physical incapacity in human beings.
(emphasis added)
Moreover, the Department of Taxation and Finance publication, Taxable Status of Medical
Equipment and Supplies, Prosthetic Devices and Related Items, Publication 822 (7/87) at page 1,
provides that "Hemodialysis equipment" shall be exempt from sales and use tax "unless purchased
for use in performing medical or similar services for compensation."
The legislative history as to what constitutes "medical equipment" (Assembly mem, 1976
Legis Ann, at 343) provides that "[m]edical equipment, including iron lungs, wheelchairs, dialysis
machine. etc. will be exempt from the Sales Tax when purchased for an individual. Services for
exempt medical equipment and devices will also be exempt. The Sales Tax exemption offers relief
only to individuals-purchases for use in the performance of services for compensation will continue
to be taxed." (emphasis added)
A hemodialysis kidney machine and the disposable supplies used in conjunction with the
machine constitute medical equipment rather than a prosthetic aid. Althin CD Medical, Inc., Adv
Op Comm T&F, November 26, 1991,
TSB-A-91(72)S.
Therefore hemodialysis equipment and supplies sold by Petitioner, which includes artificial
kidneys, pursuant to Publication 822 (7/87), supra and the legislative history concerning Section
1115(a)(3) of the Tax Law, supra, constitutes medical equipment and supplies. Accordingly,
pursuant to Sections 1115(a(3) of the Tax Law, Section 528.4(e)(1) of the Sales and Use Tax
Regulations and Althin CD Medical, Inc., supra, the receipts from the sale of artificial kidneys by
Petitioner are exempt from sales and use taxes unless purchased at retail for use in performing
medical and similar services for compensation.
It is noted that sales of artificial kidneys to exempt organizations as defined in Section
1116(a) of the Tax Law are exempt from the imposition of sales tax.

DATED: February 26, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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