Is a hospital's purchase of an infant incubator exempt from Texas sales tax?

Plain-English summary

A hospital asked the Comptroller whether its purchase of an infant incubator is taxable. The Comptroller held that sales tax is not due, because the incubator qualifies as a prosthetic device for sales tax purposes under Rule 3.284 (Drugs, Medicines, Medical Equipment and Devices).

The reasoning: an incubator is an apparatus for maintaining an infant (usually premature or hypoxic) in an environment of proper oxygenation, humidity, and temperature — in effect continuing a womb-like environment necessary for continued incubation, and assisting hypoxic infants with breathing. Because it performs those functions, it fits the prosthetic device definition in Rule 3.284 and is exempt. The letter noted that in the past infant incubators had been exempted on a different ground — as specialized hospital beds — but the current basis for the exemption is that the incubator is a prosthetic device.

What this means for you

Hospitals and medical providers

An infant incubator can be purchased free of Texas sales tax as a prosthetic device under Rule 3.284. When buying medical equipment, check whether the item meets the rule's device definitions, since qualifying items are exempt.

The basis for the exemption matters

The Comptroller grounded this exemption in the prosthetic device definition, not the older "specialized hospital bed" rationale. If you are documenting an exemption, tie it to the qualifying category in Rule 3.284.

Common questions

Q: Is an infant incubator taxable in Texas?
A: No. A hospital's purchase of an infant incubator is exempt from sales tax because it qualifies as a prosthetic device under Rule 3.284.

Q: Why does an incubator count as a prosthetic device?
A: Because it maintains an infant in an environment of proper oxygenation, humidity, and temperature — continuing a womb-like environment and assisting hypoxic infants with breathing — which fits the prosthetic-device definition.

Q: Wasn't the incubator exempt as a hospital bed before?
A: The letter notes it had been exempted in the past as a specialized hospital bed, but the current basis for the exemption is that it qualifies as a prosthetic device.

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; the infant incubator qualifies as a prosthetic device under this rule and is therefore exempt.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8808L0904E13

Original ruling text

August 26, 1988

Dear***:

Thank you for your inquiry regarding the taxability of an incubator purchased
by a hospital.

Sales tax is not due on the purchase of an infant incubator because the
incubator qualifies as a prosthetic device for sales tax purposes. In the past,
infant incubators were exempted from sales tax as specialized hospital beds.
However, Stedman's Medical Dictionary defines an incubator as an apparatus for
maintaining an infant (usually premature or hypoxic) in an environment of
proper oxygenation, humidity, and temperature. In effect, the incubator
continues an environment (similar to the mother's womb) necessary for continued
incubation. Furthermore, the incubator assists hypoxic infants with breathing.
Since the infant incubator qualifies as a prosthetic device as defined in the
enclosed Comptroller's Rule 3.284 (Drugs, Medicines, Medical Equipment and
Devices), it is exempted from sales tax.

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

If you have any questions, please contact Tax Correspondence. You may call
toll free 1-800-252-5555, or our regular number is 512/463-4600.

Sincerely,

Bob Jeffcoat
Tax Correspondence