Are carbon tanks and chlorine test packets used with a hemodialysis machine exempt from Texas sales tax?

Plain-English summary

A company providing hemodialysis services e-mailed the Comptroller with a specific billing question. When a physician orders hemodialysis treatment for a patient, a hemodialysis machine is set up with connected carbon tanks, which are exchanged at regular intervals. At certain points, the company also samples the water flowing through those tanks using purchased chlorine packets to detect chlorine levels. The company was being charged sales tax on both the carbon tanks and the chlorine packets and wanted the Comptroller to verify whether that tax was correct.

The Comptroller's answer draws a clean timing line: carbon tanks and chlorine packets used DURING hemodialysis treatment are exempt from sales tax. But if either item is used prior to or after treatment, that use is taxable. In other words, the exemption isn't a blanket exemption for the item category — it tracks the specific use, meaning the same type of carbon tank or chlorine packet could be exempt in one use (during a treatment session) and taxable in another (testing water outside of an active treatment).

What this means for you

Hemodialysis and dialysis service providers

Track exactly when your carbon tanks and chlorine test packets are used. Items connected to the machine and used during an active treatment session qualify for exemption; the same items used before or after treatment (e.g., routine water-quality testing outside of an active session) are taxable. This is a use-based test, not a blanket exemption for the item type.

Medical equipment suppliers billing dialysis providers

If you're the vendor selling these items, be aware your customer may owe tax on only part of what you sell them, depending on how they use each item — though the actual collection point is still your sale to them unless a resale/exemption certificate covers the transaction.

Accountants and tax professionals

This is a narrow, use-based exemption ruling — a good reminder that even within medical/dialysis equipment, timing and purpose of use (during vs. outside of treatment) can split otherwise-identical purchases into exempt and taxable portions.

Common questions

Q: Are carbon tanks used with a hemodialysis machine exempt from sales tax?
A: Yes, when used during hemodialysis treatment; taxable if used before or after treatment.

Q: Are chlorine test packets used to check water quality for dialysis exempt?
A: Yes, during treatment; taxable if used outside of an active treatment session.

Q: Is the exemption based on the type of item or how it's used?
A: How it's used — the same item can be exempt in one use and taxable in another, depending on whether it's connected to an active treatment.

Q: Can other dialysis providers rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200008585L

Original ruling text

August 11, 2000

From: Bettie Peterson
To: **
Subject: sales tax question

Thank you for your recent email.

Carbon tanks and chlorine packets used during hemodialysis treatment are
exempt. If either of these items are used prior to or after treatment, the
items are taxable for that use.

Referenced rules are available at
.

The State Tax Automated Research system, that provides viewing and downloading
of rules, edited letter rulings, hearings, AG Opinions, etc., may be accessed
on the Internet at http://www.window.state.tx.us/.

This opinion is based on the facts you submitted and current law. Other facts,
though similar, may result in different answers.

If you have questions or need more information, I will be glad to help you.
You may call me toll free from anywhere in the United States at 1-800-531-5441,
extension 5-0330.

On Tue, 01 Aug 2000 10:46:03 -0500 **
wrote:

Our company provides hemodialysis services. When a patient needs this service
a physician order is written to provide a hemodialysis machine. As part of
this machine, carbon tanks are connected to the machine. We are currently
charged sales tax on those carbon tanks. These tanks are exchanged at regular
intervals. At certain times a sample of water flowing these carbon tanks are
taken. We purchase chlorine packets to detect the level of chlorine in the
water. We currently pay sales tax on those packets. My question is 1) is the
sales tax charged on the carbon tanks correct and 2) is the sales tax charged
on the chlorine packets correct. I would appreciate your verification of the
above items.