Are enteral and parenteral feeding systems and their supplies exempt from Texas sales tax as prosthetic devices?

Plain-English summary

A firm representing a for-profit hospital asked the Comptroller about the taxability of enteral and parenteral feeding systems and their components. Enteral systems are tube-feeding systems (a pump, feeding bag, and tube) that deliver nutritional solutions directly to the digestive tract for patients who cannot eat normally. Parenteral systems (an IV catheter, administration set or pump cassette, a pump, and sometimes a filter) deliver nutrition, fluids, volume, electrolytes, or drugs through the bloodstream. Both perform the function of one or more vital organs.

The Comptroller held that the enteral and parenteral devices are prosthetic devices and are therefore exempt from sales tax under Rule 3.284 (Drugs, Medicines, Medical Equipment and Devices).

Related supplies are also exempt. However, the seller's records should substantiate the correlation of otherwise-nonexempt products — such as tubing, IV pole, tape, and dressing — when they are sold as supplies related to the prosthesis. The letter also corrected the reference to the underlying hearing, noting the correct number is 18,326.

What this means for you

Hospitals and medical suppliers

Enteral and parenteral feeding systems can be purchased or sold free of Texas sales tax as prosthetic devices under Rule 3.284, because they perform the function of a vital organ. This covers the systems and their components.

Documenting exempt "related supplies"

Items like tubing, IV poles, tape, and dressings are not exempt on their own, but they can be exempt when sold as supplies related to the prosthetic device. Keep records that tie those supplies to the exempt device — the exemption for related supplies depends on that documented correlation.

Common questions

Q: Are enteral and parenteral feeding systems taxable in Texas?
A: No. They are prosthetic devices exempt from sales tax under Rule 3.284 because they perform the function of one or more vital organs.

Q: Are the related supplies exempt too?
A: Yes, related supplies are exempt, but records should substantiate that otherwise-nonexempt items (tubing, IV pole, tape, dressing) are sold as supplies related to the prosthesis.

Q: What documentation do I need for the supplies?
A: Records that substantiate the correlation of the nonexempt products to the prosthetic device when sold as related supplies.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rule cited: 34 Tex. Admin. Code § 3.284 (enclosed) — Drugs, Medicines, Medical Equipment and Devices; enteral and parenteral feeding systems qualify as prosthetic devices (performing the function of a vital organ) and are exempt, as are related supplies with substantiating records. The letter references Comptroller Hearing No. 18,326.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8808L0904E10

Original ruling text

August 1, 1988

Dear **:

Thank you for your letter concerning the taxability of enteral and parenteral
feeding systems and their components.

The enteral and parenteral devices are considered prosthetic devices, as you
explained, and are therefore exempt from sales tax. I am enclosing Rule 3.284
for your information.

In addition, the related supplies are also exempt. However, records should
substantiate the correlation of nonexempt products (i.e. tubing, IV pole, tape,
dressing, etc.) when sold as related supplies to the prosthesis.

The correct number of the hearing you referenced is 18,326.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information,you may write to
Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence

July 18, 1988

Ms Deborah Angus
Supervisor of Tax Correspondence
State of Texas
P. O. Box 13528
Austin, TX 78711

Dear Ms. Angus:

Our firm is currently representing a client which is a for-profit hospital. I
would like an interpretation of how the decision rendered in Hearing # 18,326
(corrected) would affect the taxability of enteral and parenteral systems used
in their hospita1.

The enteral systems are "tube-feeding systems" which are used to provide
nutritional solutions to patients who are unable to consume nutrients through
the normal means of eating and digestion. These systems are made up of a pump,
a feeding bag and a tube which supply food directly to the digestive tract.

The enteral systems are used almost exclusively for providing nutritional
substances to the body, therefore they are providing the function of a vital
organ as specified in the definition of a prosthesis devise in Rule 3.284.

The parenteral systems are used to provide the body with nutritional solutions
and other solutions via the bloodstream. The system is made up of an
intravenous (IV) catheter (needle with connecting tube) an administration set
or pump cassette, a pump and sometimes a filter.

The parenteral systems are used to provide nutritional solutions, fluid
replacement, volume replacement, electrolytes or to administer a drug. The
nutritional solutions are necessary when the patient cannot digest foods
through the normal means as described above. Fluid replacement is needed when
the body cannot retain fluids as it should or the digestive system cannot
consume and process liquids as it should. Volume replacement is necessary when
the cardiac system is not providing adequate blood pressure or blood volume.
When the liver and kidneys fail to adequately control the electrolyte balance,
additional electrolytes are added intravenously. The parenteral systems are
also used to administer drugs in much the same manner as a hypodermic needle
and syringe. These parenteral systems are used to perform the function of one
or several vital organs depending on the condition of the patient.

I would greatly appreciate your opinion on the taxability of these entire
systems or the components of these systems as soon as possible. If you do not
rule that these systems meet the qualifications of a prosthetic device, could
you please explain the difference between these systems and those described in
Hearing # 18,326 (corrected) which preclude them from qualifying for exemption.
Thank you.

Sincerely,