Is a single-use surgical staple fixation kit — where only the implanted staples, not the disposable delivery device that comes with them, stay permanently in the body — exempt from Texas sales tax as an orthopedic device?

Plain-English summary

A medical device manufacturer makes a single-use "Staple System" used by surgeons for foot-fixation surgery. The kit bundles several disposable, single-use parts together: a drill bit, a staple-on-delivery device, a drill guide, two alignment pins, and a staple tamp. Only the pre-loaded staples themselves stay permanently in the patient's body — everything else in the kit (the delivery device, drill bit, guide, pins, tamp) is used during the procedure and then discarded; none of it can be reused on another patient. The manufacturer asked whether the whole Staple System qualifies as an exempt orthopedic device.

The Comptroller ruled yes, the whole system is exempt. Texas exempts an "orthopedic device" — defined as any appliance or device specifically designed for correcting or preventing skeletal, joint, or spinal deformities, defects, or chronic diseases — under § 151.313(a)(5) and Rule 3.284(a)(12). Even though only the staples are permanently implanted, the Comptroller treated the whole kit as a single exempt unit because the delivery hardware can't be separated from or function without the staples — it exists solely to deliver and fix the staples during surgery. The Comptroller drew a direct parallel to Zimmer US, Inc. v. Combs, 368 S.W.3d 579 (Tex. App.—Austin 2012, no pet.), where the Texas Court of Appeals held that similar spinal orthopedic appliance components met the "orthopedic device" definition — reinforcing that a device doesn't lose its exempt status just because it includes disposable delivery/application hardware alongside the part that actually stays in the body.

What this means for you

Medical device manufacturers selling single-use surgical implant kits

Where only one component of a bundled surgical kit is permanently implanted, this ruling shows you don't need to split the kit into "exempt implant" plus "taxable delivery hardware." If the delivery/application components are inseparable from, and non-functional without, the implanted part — and can't be reused on another patient — the Comptroller will treat the entire single-use kit as one exempt orthopedic device.

Hospitals and surgical practices purchasing implant fixation kits

This is a favorable, taxpayer-friendly result worth checking against your own purchasing — confirm with your supplier whether a similar bundled single-use fixation system is being taxed correctly given this precedent, particularly for kits designed around skeletal, joint, or spinal correction.

Accountants and tax professionals

Zimmer US, Inc. v. Combs is the key case anchor here — worth citing whenever a bundled surgical kit contains both a permanently implanted component and inseparable disposable delivery hardware. The exemption analysis under Rule 3.284(a)(12) turns on the design purpose of the whole appliance/device, not solely on which physical piece stays in the body.

Common questions

Q: Does every component of a surgical kit need to be permanently implanted to qualify for the orthopedic device exemption?
A: No — as this ruling shows, disposable delivery/application hardware that is inseparable from and non-functional without the implanted component can be part of the same exempt orthopedic device.

Q: What's the key legal test for "orthopedic device"?
A: Whether the appliance or device is specifically designed for correcting or preventing deformities, defects, or chronic diseases of the skeleton, joints, or spine — per Rule 3.284(a)(12).

Q: Does the exemption require the device to be reusable?
A: No — this single-use kit, discarded after one surgery, still qualified as exempt.

Q: Can another medical device manufacturer rely on this ruling for a similar kit?
A: No. It binds the Comptroller only for the taxpayer and facts presented; a kit where the non-implanted components have independent function or reuse potential could be analyzed differently.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.313(a)(5) (orthopedic device exemption)
• Tex. Tax Code § 151.051 (sales tax imposed); § 151.010 (taxable item); § 151.009 (tangible personal property)
• 34 Tex. Admin. Code § 3.284(a)(12) (orthopedic appliance definition)

Cited case law:

• Zimmer US, Inc. v. Combs, 368 S.W.3d 579 (Tex. App.—Austin 2012, no pet.) — bundled spinal orthopedic appliance components met the exemption definition

Source

• Landing page (STAR search): https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201903016L

Original ruling text

March 22, 2019

RE: Private Letter Ruling No. 20181005103228

**, Taxpayer No. **

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE: (1)] We are responding to your request dated Sept. 12, 2018 and additional information provided by email on Oct. 16, 2018. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of ** (Taxpayer) Part No. **, ** (Staple System), which is a medical device.

Facts Presented

Taxpayer states that it is a manufacturer and retailer of medical supplies and equipment. The Staple System is used by medical practitioners during fixation procedures for various foot surgeries. It is a low-profile implant comprised of single-use disposable parts: a drill bit, a staple-on-delivery device, a drill guide, two staple alignment pins and a staple tamp.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Is the Staple System an orthopedic device that is exempt from Texas sales and use tax.

Ruling: The Staple System is an orthopedic appliance and exempt from Texas sales and use tax under Section 151.313(a)(5) (Health Care Supplies) and Rule 3.284(a)(12) (Drugs, Medicines, Medical Equipment, and Devices).

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). A taxable item is defined as tangible personal property and taxable services. Section 151.010 (Taxable Item). Tangible personal property is defined as personal property that can be seen, weighted, measured, felt, or touched or that is perceptible to the senses in any manner. Section 151.009 (“Tangible Personal Property”).

Certain health care supplies are exempted from taxes imposed under Section 151.313 (Health Care Supplies). Section 151.313(a)(5) exempts an orthopedic device and supplies from sales and use tax. An orthopedic appliance is “any appliance or device designed specifically for use in the correction or prevention of human deformities, defects, or chronic diseases of the skeleton, joints or spine.” Rule 3.284(a)(12).

The Staple System contains multiple parts. Although only the pre-loaded staples (staple-on-delivery device) in the Staple System are permanently implanted in the body, the staples themselves are only one component of each single use Staple System. The staples cannot be separated from and are not functional without the delivery device.

The Staple System is an exempt orthopedic appliance under Rule 3.284(a)(12) as the delivery device is specifically designed to facilitate staple fixation for various foot surgeries. After surgery, the delivery device cannot be reused on another patient. The components of the Staple System are similar to the spinal orthopedic appliances that the Texas Court of Appeals has held to meet the definition of “orthopedic device” under Section 151.313(a)(5) and Rule 3.284(a)(12). See, e.g. Zimmer US, Inc. v. Combs, 368 S.W.3d 579 (Tex. App. – Austin, 2012, no pet.).

The Texas Tax Code and Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20181005103228.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

1. Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.