Were home-dialysis machines and mixed supply kits exempt from Texas sales tax?

Plain-English summary

Kidney-dialysis machines and supplies necessary to operate them were exempt prosthetic devices. A kit mixing exempt and taxable supplies followed predominant cost: taxable if taxable contents cost more, exempt if exempt contents cost more.

Therapeutic appliances required a licensed practitioner's prescription. Prescribed human drugs were exempt, and leasing a dialysis machine was exempt because the machine itself qualified.

What this means for you

Mixed kits required item classification and a cost comparison; prescription-dependent items also needed the stated documentation.

Common questions

Were dialysis machines exempt? Yes. How were mixed kits treated? By predominant cost. Were therapeutic appliances automatically exempt? No, a prescription was required.

Citations and references

• Comptroller Rule 3.284, including the provisions on prosthetic devices, therapeutic appliances, and prescribed drugs.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1038B01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

August 24, 1990

Dear ***:

We received your letter questioning the taxability of home
dialysis supply kits provided to your patients.

Kidney dialysis machines and the related supplies necessary
to operate the machinery are considered prosthetic devices
which are exempt from sales and use tax. See sections (a)
(10) and (c)(1) of the enclosed Rule 3.284 relating to drugs,
medicines, and medical equipment.

The dialysis supply kits you sell to your patients contain
supplies necessary to operate the machinery along with other
supplies which would be taxable. Therefore, we have to look
at the predominant cost of the entire kit to determine the
taxability of the kit. If the cost of the taxable items is
greater than the cost of the exempt items, the kit is taxa-
ble. If the cost of the exempt items is greater, the kit
will be exempt.

Several of the items in each kit are considered therapeutic
appliances. Therapeutic appliances are exempt when sold,
leased or rented to individuals under a prescription of a
licensed practitioner of the healing arts. See Section (a)
(11) and (c)(6) of the enclosed Rule 3.284.

Enclosed is a copy of the contents of the kits you sell. Be-
side each item in the kits I have noted whether the item is
exempt and why, therapeutic, or taxable. I have made a foot-
note when my answer is dependent on my understanding of what
the item does. If the kits are sold to an individual on a
doctor's prescription, then you should compare the cost of
the items marked taxable to the cost of the remaining items
to determine the predominant cost of the kits.

Sales tax is not due on the sale of drugs and medicines sold
or dispensed to humans on the oral or written prescription of
licensed practitioners of the healing arts. If a patient de-
velops an infection and the doctor prescribes medication for
the infection, then tax is not due on the charge for the medi-
cation. See sections (a)(4) and (b)(2) of Rule 3.284.

The charge for leasing medical equipment is taxable unless the
equipment qualifies for an exemption. For example, the charge
to lease a kidney dialysis machine would not be taxable because
a kidney dialysis machine is a prosthetic device which is exempt
from sales and use tax.

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

If you have any questions you may call or write Tax Correspon-
dence. You may call toll free 1- 800- 252-5555, or our regular
number is 512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence