Do specialized air-support-therapy hospital beds, mattresses, and mattress overlays -- prescribed by physicians to prevent and treat bedsore-related skin ulceration -- qualify for New York's medical equipment sales tax exemption?

Subject

, is whether or not receipts from the sales, rentals or leases of Pneu-Care and Cardio System series of products consisting of hospital beds, mattresses, and mattress overlays, for use as described below, and future products and modifications with the same or similar function, including parts for repair and upkeep of these products, qualify for the exemption from sales tax provided under Section 1115(a)(3) of the Tax Law.

What this means for you

Three related companies market a line of "Pneu-Care" and "Cardio Systems" air-support-therapy products -- specialized hospital beds, mattresses, and mattress overlays (with names like Pneu-Care Pro 2000, Pneu-Care Dynamic ICU, and the Cardio Systems ICU Critical Care Bed) used in hospitals and, under a registered nurse's care, in homes. Except for direct hospital sales, every unit is provided strictly on a physician's prescription. Their specific medical purpose: preventing and treating skin ulceration caused by long-term bed confinement -- ulceration that, left untreated, can progress to muscle and bone damage. The products are mostly rented rather than sold outright, though occasional sales occur.

New York exempts medical equipment intended for curing, treating, or preventing illness/injury, or for correcting a physical incapacity, as long as it's primarily and customarily used for medical purposes and isn't generally useful to someone without an illness or injury -- and the Department's own regulations specifically list hospital beds as an example of qualifying medical equipment. Because these air-support products are designed and prescribed specifically to treat/prevent a distinct medical condition (pressure-related skin ulceration) and have no ordinary non-medical use, the Department found the entire product line -- plus repair/upkeep parts -- qualifies as exempt medical equipment, whether sold, rented, or leased. The opinion is careful to note, though, that it doesn't extend automatically to future products or modifications -- any new or changed product needs its own separate submission and review before the Department will rule on its tax status.

Q&A

Q: We manufacture/sell specialized medical beds, mattresses, or similar equipment prescribed by physicians for a specific medical condition -- does that automatically qualify for the medical equipment exemption?
A: Per this opinion, it qualifies if the equipment is primarily and customarily used for medical purposes and isn't generally useful to someone without illness/injury -- the Department's own regulations specifically name hospital beds as a qualifying example, and prescribed air-support therapy units met that same standard here.

Q: Does the exemption cover rentals and leases, or only outright sales?
A: Per this opinion, yes -- the exemption applies to sales, rentals, AND leases of qualifying medical equipment, plus parts used for its repair and upkeep.

Q: We're planning to release a modified or next-generation version of an already-exempt medical product -- does the exemption automatically carry over?
A: No -- this opinion explicitly states that future products or modifications aren't covered by this ruling; a description of the new/modified item and its use must be separately submitted for its own review before the Department will rule on its taxability.

Citations

• Tax Law § 1115(a)(3) -- exempts drugs/medicines and medical equipment/supplies used to cure, treat, or prevent illness or correct physical incapacity.
• Tax Law § 1115(g) -- exempts services performed on medical equipment that itself qualifies for the § 1115(a)(3)/(4) exemption.
• 20 NYCRR § 528.4(a) -- implements the medical equipment/supplies exemption.
• 20 NYCRR § 528.4(e) -- defines "medical equipment" as items primarily and customarily used for medical purposes, not generally useful absent illness/injury, expressly listing hospital beds as a qualifying example.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_32s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-94 (32)S
Sales Tax
July 27, 1994

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940418C
S940418D
S940418E

On April 18, 1994 Petitions for Advisory Opinion were received from Cardio Systems
Manufacturing, Inc., 1201 Interstate 35 North, Carrollton, Texas 75006, Cardio Systems North
America Dealer Corporation, Inc., 1201 Interstate 35 North, Carrollton, Texas 75006 and Cardio
System Sales, Inc., 1201 Interstate 35 North, Carrollton, Texas 75006.
The issue raised by Petitioners, Cardio Systems Manufacturing, Inc., Cardio Systems North
America Dealer Corporation, Inc. and Cardio System Sales, Inc., is whether or not receipts from the
sales, rentals or leases of Pneu-Care and Cardio System series of products consisting of hospital
beds, mattresses, and mattress overlays, for use as described below, and future products and
modifications with the same or similar function, including parts for repair and upkeep of these
products, qualify for the exemption from sales tax provided under Section 1115(a)(3) of the Tax
Law.
The products at issue, which consist of Pneu-Care Pro 2000; Pneu-Care Plus+ and Pneu-Care
Plus - Kinetic Series; Pneu-Care Dynamic ICU; Pneu-Care Pulse; Pneu-Care RT 2000 (with SC
Mattress or Turning Overlay and Theraderm Comforter); Pneu-Care Model 600 ASTA frame and
mattress combination (with size variations such as Pneu-Care Pediatric); Pneu-Care Comfort Care
Rx Air Support Therapy; and Cardio Systems ICU Critical Care Bed, are air support therapy units
which are used by and in hospitals, and under the care of registered nurses for home patients,
exclusively on a prescription by a physician basis. The air support therapy units are primarily
available on a rental basis rather than sale, although occasional sales do occur. With the exception
of sales directly to hospitals, all transactions are under a doctor's prescription.
The air support therapy units are used to alleviate the malfunction of parts of the body.
Specifically, the products are all designed in connection with alleviation and treatment of skin
ulceration caused by long-term bed care. In the case of long-term patient care, skin ulceration
proceeds to involve muscle and bone damage, necrosis of bone, and damage to muscle, bone and
supporting structures. The ulceration described is caused by a malfunction of the capillaries in and
adjacent to the skin and in the supporting structures, caused by the long-term confinement to bed care
in the long-term patient.

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TSB-A-94 (32)S
Sales Tax
July 27, 1994
Section 1115 of the Tax Law states in part:
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, ... but not including ... medical equipment
(including component parts thereof) and supplies, ... purchased at retail for use in
performing medical and similar services for compensation.
(g) Services otherwise taxable under paragraph (3) of subdivision (c) of section
eleven hundred five shall be exempt from tax (1) if performed upon ... medical
equipment when receipts from the retail sale of such items are exempt from tax under
the provisions of paragraphs three and four of subdivision (a) of this section....
Section 528.4 of the Sales and Use Tax Regulations states in part:
Drugs and medicines; medical equipment and supplies. [Tax Law, 1115(a) (3) and
(g)]

(a) Exemption. (1) Drugs and medicines intended for use ... 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 ... are exempt.
(2) Services performed upon exempt medical equipment are also exempt.
(e) Medical equipment. (1) Medical equipment means machinery, apparatus and
other devices (other than prosthetic aids, hearing aids, eyeglasses 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.
(2) To qualify, such equipment must be primarily and customarily used for medical
purposes and not be generally useful in the absence of illness, injury or physical
incapacity.
Example 1: Items such as hospital beds ... are medical equipment.

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TSB-A-94 (32)S
Sales Tax
July 27, 1994
The products, which are enumerated above, are all intended for use in the cure, mitigation
or treatment of illness and are not generally useful in the absence of illness, injury or physical
incapacity. Accordingly, the products enumerated above, including parts for use in repair and
upkeep of such products, and currently being offered for sale, rental or lease by Petitioners qualify
as medical equipment for purposes of the exemptions provided under Sections 1115(a) (3) and (g)
of the Tax Law and Sections 528.4 (a)(2) and (e)(2) of the Sales and Use Tax Regulations.
It is noted that the sales tax status of any future products or modifications to existing products
cannot be determined within the scope of this Advisory Opinion. A description of any future
products or modifications to existing products and the use of such items must be submitted for
review before a ruling on the sales taxability of such items can be issued.

DATED: July 27, 1994

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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