New York – Taxability of Mobile Medical Services

SALT Report 2780 – The New York Division of Taxation and Finance issued an advisory opinion regarding whether a Taxpayer is making sales of mobile medical services to medical facilities and, if so, whether those sales are exempt from New York State and local sales and use taxes.

The Taxpayer, in this case provides medical equipment and staff to health care facilities and doctors. The type of equipment that the Taxpayer provides varies based on the type of patient testing or treatment to be performed at the customer’s facility, but the testing is generally some form of imaging, such as x-ray or ultrasound.

Prior to the delivery of the equipment, the Taxpayer enters into a written contract with its customer, in which it details the responsibilities of both the Taxpayer and the customer.  According to the terms of the contract, the Taxpayer is responsible for providing an employee to operate the medical equipment at the customer’s facility and to maintain the equipment in good working condition.

Upon review of the facts, the Department stated that the question in this case, is whether the Taxpayer’s provision of medical equipment and employees to operate the equipment constitutes a retail sale of tangible personal property and services; or, if the transaction is for taxable medical services only that may qualify for an exemption.

The Department stated that the Taxpayer stated that its employees are the only ones who operate the medical equipment. However, the Taxpayer’s facts indicate that the attending physician, who is not an employee the Taxpayer, is involved with both the testing and treatment procedures.

Specifically, noted is that while the Taxpayer’s employee may operate the equipment, it is in fact the attending physician who controls the targeting, the strength, and the timing of exposure during the procedure. As a result, the employee transfers possession of the equipment directly to the attending physician.

Because of the transfer of control, the Taxpayer has made a taxable sale of the medical equipment.  Accordingly, sales tax is due on its charges to its customers for the sale, rental, lease, or license to use the equipment under § 1105(a) of the Tax Law. However, the Taxpayer’s separately stated charges for its employees to operate the equipment while it is at the customer’s facility would not be taxable.

In addition, because the equipment is taxable medical equipment, the payment of wages, salary, or other compensation to an employee to maintain, service, or repair the equipment would not be taxable, under Tax Law § 1105(c). However, the Taxpayer would be required to pay sales or use tax under § 1105(c)(3) if it pays others, such as a contractor or subcontractor to maintain, service, or repair the equipment.

For Further Information

New York Division of Taxation of Finance – Advisory Opinion TSB-A-13(21)S