Is a wedge-shaped foam bed pillow marketed to control acid reflux exempt from sales tax as medical equipment?

Plain-English summary

Weaver Corporation was considering selling a "Bed Pillow" -- a wedge of foam rubber about 42 inches long, tapering from 1 inch to 8 inches thick, available in several widths -- designed to help control gastroesophageal reflux disease (GERD) by elevating the upper body during sleep. No prescription is required, but the pillow would typically be recommended by a physician or a health maintenance organization, and Weaver said it has no other known application besides managing this condition. Weaver planned to sell the pillow both to medical groups for resale and directly to patients.

Tax Law § 1115(a)(3) exempts drugs, medicines, medical equipment, and supplies used to cure, treat, or prevent illness, or to correct or alleviate a physical incapacity -- so long as the equipment isn't "generally useful in the absence of illness, injury or physical incapacity." Assuming the Bed Pillow meets that standard (as Weaver represented), it qualifies for the exemption when sold directly to a patient.

But the exemption has an important carve-out: it doesn't cover medical equipment and supplies (other than drugs and medicines) purchased at retail by someone who will use them "in performing medical and similar services for compensation" -- meaning a doctor or hospital using the equipment as a tool of their own practice, rather than a patient buying it for personal use. So if Weaver sells the pillow to a doctor or hospital that will use it that way, Weaver has to collect sales tax on that sale. Sales to a wholesaler who will resell the pillow, or to an organization that's tax-exempt under Section 1116(a), remain untaxed, as long as Weaver obtains the appropriate exemption certificate.

What this means for you

Medical product and health-device sellers

Whether your product qualifies for the medical equipment exemption can depend on who the direct purchaser is and how they'll use it -- a sale to the end patient for personal use is treated differently than a sale to a healthcare provider who will use the same equipment as part of billing patients for medical services. Track your customer types and collect exemption documentation accordingly.

Physicians, hospitals, and medical groups purchasing equipment

If you're buying medical equipment to use in delivering services you charge patients for (rather than to resell or give to patients outright), expect the vendor to charge sales tax even though the same item would be exempt if sold straight to a patient.

Accountants and tax professionals

This opinion is a clean illustration of the § 1115(a)(3)/§ 528.4(e) "generally useful absent illness" test plus the often-overlooked carve-out for medical equipment purchased by a provider for use in performing compensated services -- worth flagging any time a client sells the same device to both patients and providers.

Common questions

Q: Does the pillow need a doctor's prescription to be exempt?
A: No -- the opinion notes no medical prescription is required, only a physician's or HMO's recommendation; the exemption doesn't hinge on prescription status.

Q: Why would the identical pillow be taxable in one sale and exempt in another?
A: Because the exemption for medical equipment (other than drugs and medicines) doesn't apply when the buyer will use the equipment "in performing medical and similar services for compensation" -- a provider buying the pillow as a practice tool is treated differently than a patient buying it for personal use.

Q: Can another seller of a similar product rely on this ruling?
A: No. This advisory opinion binds the Department only with respect to Weaver Corporation and its specific "Bed Pillow" product as described.

Citations and references

Statutes and regulations:

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

Prior rulings and cases referenced:

• Pegasus Airwave, Inc., Adv Op Comm T&F, January 8, 1996, TSB-A-96(1)S

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_82s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (82) S
Sales Tax
December 26, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S960611A

On June 11, 1996, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Weaver Corporation, 666 Fifth Avenue, 21st Floor, New York, NY 10103. Petitioner,
Weaver Corporation, submitted additional information pertaining to the Petition on October 29,
1996.
The issue raised by Petitioner is whether the sale of a specialized "Bed Pillow" when
recommended by a physician to control gastroesophogeal reflux disease is subject to sales and use
taxes.
Petitioner submits the following facts as the basis for this Advisory Opinion. Petitioner is
considering selling "Bed Pillows" to either medical groups for resale, or to the medical group's
patients on a direct sale basis. Petitioner contends that the "Bed Pillow" should eliminate or reduce
the need to take medication for the control of gastroesophogeal reflux disease. While a medical
prescription is not required for this product, it would be acquired upon the recommendation of a
health maintenance organization or a physician.
The "Bed Pillow" is a wedge of foam rubber, approximately 42" long, increasing in thickness
from 1" at the narrow end to 8" at the thick end. The "Bed Pillow" is available in widths of 27", 30"
and 36"
Petitioner contends that to the best of its knowledge, the "Bed Pillow" has no other
application, except for the control of this medical problem.
Section 1115(a)(3) of the Tax Law provides an exemption from sales tax for:
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.
Section 528.4 of the Sales and Use Tax Regulations provides, in part:
(e) Medical equipment. (1) Medical equipment means machinery, apparatus and other
devices (other than prosthetic aids, hearing aids, eyeglasses and artificial devices

-2­
TSB-A-96 (82) S
Sales Tax
December 26, 1996
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.
*
*
*
(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 "Bed Pillow", for use as described above and presuming that the "Bed Pillow"
is not generally useful in the absence of illness, injury or physical incapacity, 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. See Pegasus Airwave. Inc., Adv Op Comm
T&F, January 8, 1996, TSB-A-96(1)S.
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, Petitioner's sales of its "Bed Pillow" directly to patients are not subject to sales
or compensating use tax. When Petitioner sells its "Bed Pillow" to someone who will use it 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 ll16(a) of the Tax Law or to someone who will resell the "Bed Pillow", such
as a wholesaler, then no sales or use tax will be due, provided that Petitioner obtains the appropriate
exemption document from the purchaser.

DATED: December 26, 1996

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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