New York Advisory Opinion TSB-A-96(1)S: Is a therapeutic powered air mattress system for bedsore-prone patients exempt from New York sales tax as medical equipment, when sold or leased to individual patients versus to hospitals and nursing homes?

Plain-English summary

Pegasus Airwave Inc. makes a "unique powered air mattress system for immobilized patients at high risk of, or suffering from, any pressure sores, bed sores, decubitus ulcers and other skin trauma problems." Fitted into either a standard hospital bed or a patient's own bed at home, the system alleviates pain and speeds skin healing by providing zero pressure and 100% airflow to the wound, and it's also used to prevent new or recurring ulcers. Petitioner's system is primarily leased, and sometimes sold outright, to individual patients under a written prescription from a medical doctor; it's also leased or sold to institutions -- typically hospitals or nursing homes -- through a purchase order or contract. The system is used exclusively for medical treatment of skin trauma, never for any non-medical purpose.

The Department ruled the air mattress system qualifies for the medical equipment exemption under Tax Law § 1115(a)(3) and 20 NYCRR § 528.4(e), which exempts medical equipment intended for the cure, mitigation, treatment, or prevention of illness or physical incapacity in humans -- so long as the equipment is primarily and customarily used for medical purposes and isn't generally useful absent illness or injury. Given the system's exclusively medical function (and its use under a doctor's prescription or an institutional care setting), it clears that bar. However, the exemption comes with a significant limitation: it does NOT cover medical equipment purchased at retail for use in performing medical or similar services FOR COMPENSATION. So when Petitioner sells or leases the system to a purchaser -- such as a doctor's practice or a hospital -- that will use it in the course of providing paid medical treatment to patients, Petitioner must collect sales or use tax from that purchaser on the transaction. By contrast, if Petitioner sells to an organization that's independently exempt under Tax Law § 1116(a) (e.g., certain nonprofit institutions), or to someone who will resell the equipment (like a wholesaler), no sales or use tax is due -- provided Petitioner obtains the appropriate, properly completed exemption certificate from that purchaser.

What this means for you

Durable medical equipment manufacturers and suppliers

Even genuinely medical, prescription-only equipment can carry a taxable sale when the BUYER is a medical-service provider (a doctor's office, hospital, or clinic) that will use the equipment as part of delivering paid care to patients -- don't assume every sale of exempt-category medical equipment is automatically tax-free; check who the purchaser is and what they'll do with it.

Hospitals, nursing homes, and medical practices purchasing therapeutic equipment

Expect to pay sales tax on medical equipment purchases you'll use to deliver compensated medical services to your own patients, even though the same equipment would be exempt if sold directly to an individual patient under a doctor's prescription for personal use.

Wholesalers and exempt organizations in the medical equipment supply chain

If you're reselling the equipment, or you're an organization independently exempt under Tax Law § 1116(a), make sure to provide the supplier a properly completed exemption certificate -- that documentation is what lets the supplier treat the sale as tax-free.

Common questions

Q: Why does the same product get taxed differently depending on the buyer?
A: Because the exemption in § 1115(a)(3) specifically targets medical equipment used by or for the benefit of the actual patient -- it excludes equipment purchased by a professional or institution to use as a tool in delivering compensated medical services, treating that purchase more like ordinary business equipment for tax purposes.

Q: Does a doctor's prescription requirement affect the exemption analysis?
A: The prescription requirement supports that the system is genuinely medical equipment (not generally useful absent illness), which is necessary for the exemption to apply at all -- but it doesn't override the separate rule that sales to compensated medical-service providers are excluded from the exemption.

Q: What paperwork does Petitioner need to avoid collecting tax on an exempt sale?
A: A properly completed exemption certificate from the purchaser -- either showing the purchaser is an organization exempt under § 1116(a), or that the purchaser intends to resell the equipment rather than use it to perform paid medical services.

Citations and references

Statutes and regulations:

• Tax Law § 1115(a)(3) (medical equipment and supplies exemption)
• 20 NYCRR 528.4(e) (definition of medical equipment)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_1s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (1)S
Sales Tax
January 8, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950621B

On June 21, 1995, a Petition for Advisory Opinion was received from Pegasus Airwave Inc.,
5300 Broken Sound Boulevard, Suite 100, Boca Raton, Florida 33487.
The issues raised by Petitioner, Pegasus Airwave Inc., are whether the sale of its therapeutic
air mattress system is exempt from sales tax pursuant to Section 1115(a)(3) of the Tax Law and
Section 528.4 of the Sales and Use Tax Regulations and, if so, whether the exemption applies to the
sale or lease of the product to individuals as well as institutions (i.e. hospitals, nursing homes).
Petitioner's therapeutic system, as described by the Petitioner, "is a unique powered air
mattress system for immobilized patients at high risk of or suffering from, any pressure sores, bed
sores, decubitus ulcers and other skin trauma problems. Fitted into a standard hospital bed or a
patient's own bed at home, the Pegasus Airwave System alleviates pain and therapeutically aids and
accelerates the skin's healing process by providing zero pressure and allowing 100% air flow to the
wound. It is also used as a prevention to the addition or recurrence of any future ulcers."
Petitioner's therapeutic system is primarily leased and sometimes sold outright to individuals
under the direction of and with a written prescription from a medical doctor. It is also leased or sold
to institutions, usually hospitals or nursing homes, through a purchase order or contractual
agreement. It is only used for the medical treatment of skin trauma and not used for any non-medical
purpose.
Section 1115(a)(3) of the Tax Law provides an exemption from sales tax for:
[d]rugs 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.
Section 528.4 of the Sales and Use Tax Regulations provides, in part, as follows:
(e) Medical equipment. (1) Medical equipment means machinery, apparatus and
other devices (other than prosthetic aids, hearing aids, eyeglasses and artificial

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TSB-A-96 (1)S
Sales Tax
January 8, 1996
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.

• *

*

(3) Replacement parts for medical equipment are exempt from tax provided such
replacement parts are identifiable as medical equipment replacement parts. If a
replacement part is not identifiable as a part for medical equipment, the purchaser
must pay the tax at the time of purchase. The purchaser may then apply directly to
the Sales Tax Bureau for a refund of the tax paid provided he can show that the part
was used to replace a defective part on exempt medical equipment.
(4) Medical equipment is not exempt if purchased by a person performing medical
or similar services for compensation. (See subdivision (g) of this section)
Petitioner's air powered mattress system, for use as described above, qualifies for the
exemption from sales and compensating use tax provided by Section 1115(a)(3) of the Tax law and
Section 528.4 of the Sales and Use Tax Regulations.
However, the exemption contained in Section 1115(a)(3) of the Tax Law and Section 528.4
of the Sales Tax Regulations does not apply to the sale of medical equipment and supplies, other
than drugs and medicines, purchased at retail for use in performing medical and similar services for
compensation.
Therefore, when Petitioner sells or leases its products to someone who will use them in
performing medical and similar services for compensation, such as a doctor or hospital, Petitioner
must collect sales or use tax due from the purchaser. However, if the sale is to an organization
exempt under section 1116(a) of the Tax Law or to someone who will resell them, such as a
wholesaler, then no sales or use tax will be due, provided that Petitioner obtains the appropriate
exemption certificate from the purchaser.

DATED: January 8, 1996

/s/
DORIS S. BAUMAN
Director
Technical Services Bureau

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