New York – Taxability of Medical Devices for Cardiac Patients

SALT Report 1488 – The New York Department of Taxation issued an advisory opinion regarding the taxability of medical devices used in the care of cardiac patients.  The Department determined that certain heart devices and supplies are exempt under the following conditions:
Heart Devices
Heart devices are those that are worn on or in a patient to replace or assist the function of the heart.  Specifically, they provide left, right or bi-ventricular support for patients with advanced heart failure and are intended for long-term use.  The devices may be implanted devices or devices that are attached to the patient at all times.  These devices are sold or provided directly to hospitals, or are prescribed by licensed physicians.  These type of device qualifies as a “prosthetic aid” and is exempt under Tax Law section 1115(a)(4).
External Component of Heart Devices
This includes the external components of a heart device that works along with the internal device to assist in the heart’s function.  These components include power sources, cables, monitors, or controller units. These components are attached to the heart device and are necessary to the overall function.  These qualify as “prosthetic aids” and are exempt under 20 NYCRR § TSB-A-00(41)S.
Circulatory Support Pump and Related Parts
These are pumps that provide short-term circulatory support to patients with advanced heart failure and are used only while a patient is hospitalized.  These pumps are not qualified for long-term use.  The exemption includes parts such as a motor or console that are sold along with the circulatory support pump and are necessary for it to function.  These qualify as “prosthetic aids” and are exempt under 20 NYCRR § TSB-A-00(41)S.
Medical Instruments Used During Implantation
The exemption applies to instruments that are single-use and are consumed during the surgical process.  These qualify as “medical equipment” and are exempt when purchased for use in performing medical services for compensation (20 NYCRR § 528.4[g]).
Certain supplies qualify for the exemption if they assist with or are essential to the functionality of the device. These include:
  • Vests/holsters that allow the external components of the devices to be carried more freely,
  • Shower kits to protect the external components of the devices from getting wet while the patient is bathing, and
  • Rapid charging stations that allow the power sources to be charged quickly and are integral to the use of the heart device
These qualify as “prosthetic aids” because they are integral to the normal use of the heart device under TSB-A-99 [11])S.
Full-Service Maintenance Agreements
The exemption applies to optional maintenance agreements that are offered for a flat fee, with no deductible, and use parts that are identified as replacement parts in the Heart Devices.  The maintenance, repair, or service of prosthetic aids is exempt under 20 NYCRR § 525.5[d].
Service Parts
Replacement parts for heart devices are exempt under 20 NYCRR § 528.5[c][1]if they are clearly identified by the manufacturer as replacement parts.
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