Is a breathing monitor that can be used independently of a ventilator exempt from Texas sales tax as a prosthetic device?

Subject

Breathing Monitors Used Independent Of A Ventilator — Not Exempt Prosthetic Devices

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310046L

Plain-English Summary

A manufacturer asked the Comptroller how sales tax applies to two breathing monitors it makes, Monitor LS-75 and VM-90. Per the letter's FACTS, these monitors "provide information on how a patient is breathing," and "they can be used independently of a ventilator, although they are also used at times when a patient is hooked-up to a ventilator."

The Comptroller's RESPONSE was that the monitors do not meet the definition of a prosthetic device under Rule 3.284 simply because they can be used in conjunction with a prosthetic device such as a ventilator. For use independent of the ventilator, the letter states the monitors "are taxable when sold to hospitals, clinics, doctors, etc."

The letter draws one distinction in the taxpayer's favor: "Attachments that are sold or rented as part of a unit that performs the function of a vital organ are exempt." In other words, if the monitor (or an attachment to it) is sold or rented as part of a unit that itself performs a vital-organ function — as opposed to merely being usable alongside such a unit — the exemption can apply.

As with other STAR letters, the Comptroller noted that "this opinion is based on the facts presented" and that "different facts, though similar, may result in different answers."

What This Means For You

If you sell or manufacture medical monitoring equipment: A device that merely reads out or displays information about a patient's condition (here, breathing) is not automatically treated as an exempt prosthetic device just because it is sometimes used together with equipment (like a ventilator) that does perform or replace a vital organ's function. The Comptroller looked at whether the monitor itself performs a vital organ function or is instead capable of standing on its own, independent of the ventilator.

If you sell attachments or components: Per this letter, attachments sold or rented as part of a unit that performs the function of a vital organ can be exempt — the exemption analysis in this letter turns on whether the item is part of that vital-organ-function unit, not merely compatible with or connectable to one.

If you sell to hospitals, clinics, or doctors: This letter confirms that sales of this type of monitor to those purchasers are taxable under the facts presented; hospital/medical-provider status alone does not create an exemption for equipment that fails the Rule 3.284 prosthetic device test.

Q&A

Q: Are breathing monitors like the LS-75 and VM-90 exempt from Texas sales tax as prosthetic devices?
A: No. The letter states the monitors "do not meet the definition of a prosthetic device under Rule 3.284 simply because it can be used in conjunction with a prosthetic device such as a ventilator."

Q: Does it matter that the monitor is sometimes used while a patient is on a ventilator?
A: Not by itself. The FACTS note the monitors "can be used independently of a ventilator, although they are also used at times when a patient is hooked-up to a ventilator," and the RESPONSE treats independent use as the operative fact making the sale taxable.

Q: Are these monitors taxable when sold to hospitals, clinics, or doctors?
A: Yes. The letter states that "for use independent of the ventilator, the monitors are taxable when sold to hospitals, clinics, doctors, etc."

Q: Is there any exemption mentioned in this letter?
A: Yes. The letter states "attachments that are sold or rented as part of a unit that performs the function of a vital organ are exempt."

Q: What rule did the Comptroller apply to decide this was not an exempt prosthetic device?
A: 34 Tex. Admin. Code Rule 3.284, which the letter cites directly as the source of the "definition of a prosthetic device" the monitors failed to meet.

Original ruling text

October 27, 1993

Dear ****:

This is in response to your letter dated October 18, 1993, regarding
sales tax as it applies to monitors manufactured by ****.

FACTS: Monitor LS-75 and VM-90 provide information on how a patient is
breathing. They can be used independently of a ventilator,
although they are also used at times when a patient is hooked-up to a
ventilator.

RESPONSE: The monitors do not meet the definition of a prosthetic
device under Rule 3.284 simply because it can be used in conjunction with
a
prosthetic device such as a ventilator. For use independent of
the ventilator, the monitors are taxable when sold to hospitals, clinics,
doctors, etc.

Attachments that are sold or rented as part of a unit that performs
the function of a vital organ are exempt.

This opinion is based on the facts presented. Different facts, though
similar, may result in different answers. If you have any
questions or need more information, please write or
call me at 1-800-531-5441, extension 50330, or 512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division