Are a nursing home's purchases of disposable adult diapers exempt from New York sales tax?

Plain-English summary

Martin Friedman, PC asked the Department to sort out conflicting vendor practices around sales tax on disposable adult diapers purchased by nursing homes for residents' use. Different vendors had been treating the purchases differently.

New York normally exempts "drugs and medicines" and health-preservation products from sales tax, and its own guidance (Publication 822) does list incontinence pants — similar to adult diapers — as exempt medical supplies. But there's a catch: that exemption doesn't apply when the items are "purchased at retail for use in performing medical and similar services for compensation." A for-profit nursing home is exactly that kind of provider, so its purchases of adult diapers don't qualify as exempt medical supplies.

That's not the end of the story, though. Adult diapers are also classified as clothing, and New York separately exempts clothing and footwear items costing less than $110 apiece. So the nursing home's diaper purchases qualify for that clothing exemption instead — but only from the state's 4% sales tax. The clothing exemption doesn't automatically apply to locally imposed sales taxes (city or county) unless that locality specifically elected to adopt the clothing exemption, and it also doesn't apply to the extra 3/8% tax imposed within the Metropolitan Commuter Transportation District (NYC and seven surrounding counties) unless a locality within that district separately elects it. Effective September 1, 2007 (per a 2007 law change discussed in this opinion), New York City's own local sales tax on clothing was fully repealed regardless, so clothing sold in NYC became locally tax-free too, as long as each item stays under $110.

What this means for you

Nursing homes, assisted-living facilities, and home health agencies

Purchases of adult diapers, incontinence pants, and similar products are NOT exempt as medical supplies if you're a for-profit provider performing medical services for compensation — but they ARE exempt from New York's 4% state sales tax under the clothing exemption, as long as each item costs less than $110. Check whether your locality has separately adopted the same local clothing exemption before assuming you owe zero tax altogether.

Medical supply vendors selling to healthcare providers

Don't assume every "medical supply" your for-profit healthcare customer buys is automatically tax-exempt — the exemption specifically excludes items bought by a provider to perform medical services for compensation. Check whether an alternate exemption (like the clothing exemption here) applies instead.

Accountants and tax professionals

This ruling is a good template for the general principle that an item can simultaneously be "medical supplies" and "clothing" — when the medical-supplies exemption is unavailable because of the for-compensation carve-out, check whether a different exemption (clothing, in this case) still applies. Also watch the layered local-tax rules: state exemption, MCTD 3/8% tax, and local city/county tax can each turn on separate election decisions.

Common questions

Q: Are adult diapers exempt from sales tax when purchased by a nursing home?
A: Not as medical supplies, if the nursing home is a for-profit provider performing medical services for compensation. But they are exempt from the state's 4% sales tax as clothing, as long as each item is priced under $110.

Q: Does the clothing exemption cover local sales taxes too?
A: Not automatically. A city or county must specifically elect to adopt the clothing and footwear exemption for its own local sales tax; otherwise, local tax still applies even though state tax doesn't.

Q: Does the exemption depend on whether the nursing home is for-profit?
A: Yes, in this specific analysis — the opinion is expressly premised on the nursing home being a for-profit entity performing medical services for compensation, which triggers the retail-purchase exclusion from the medical-supplies exemption.

Q: Can another provider rely on this exact ruling?
A: No. This Advisory Opinion binds the Department only as to Martin Friedman, PC and the facts it described. A nonprofit nursing home, or one not "performing medical services for compensation" in the same sense, might reach a different result on the medical-supplies question.

Citations and references

Statutes, regulations, and guidance:

• Tax Law § 1105(a) (imposition of sales tax on retail sales)
• Tax Law § 1107(b)(11) (NYC clothing and footwear exemption, effective September 1, 2007)
• Tax Law § 1109(g) (MCTD clothing exemption election)
• Tax Law § 1115(a)(3) (drugs, medicines, and health-preservation products exemption)
• Tax Law § 1115(a)(30) (clothing and footwear under $110 exemption)
• Tax Law § 1210(a)(1)(i) (local clothing and footwear exemption election)
• 20 NYCRR 528.4(h)(2) (definition of medical services)
• Taxable Status of Medical Equipment and Supplies, Prosthetic Devices, and Related Items, Publication 822 (6/01)
• Year-Round Sales and Use Tax Exemption of Clothing, Footwear, and Items Used to Make or Repair Exempt Clothing, TSB-M-06(6)S, March 29, 2006

Prior opinions cited:

• Paul C. Maggio d/b/a Patchogue Nursing Ctr., Adv Op Comm T&F, October 18, 1994, TSB-A-94(49)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2007.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a07_23s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-07(23)S
Sales Tax
August 27, 2007

Office of Tax Policy Analysis
Taxpayer Guidance Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S070606A

On June 6, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Martin Friedman, PC, 2600 Nostrand Avenue, Brooklyn, NY 11210.
The issue raised by Petitioner, Martin Freidman, PC, is whether purchases of disposable
adult diapers by a nursing home are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner’s clients operate nursing home facilities in New York State. The nursing
homes purchase adult diapers from various vendors. The adult diapers are purchased for use by
the nursing homes’ residents. These nursing homes have experienced differences among
various vendors regarding the tax treatment of purchases of the adult diapers.
Applicable law and regulations
Section 1105(a) of the Tax Law imposes sales tax on “The receipts from every retail sale
of tangible personal property, except as otherwise provided in this article.”
Pursuant to Chapter 82 of the Laws of 2007, effective September 1, 2007, section
1107(b)(11) of the Tax Law will provide:
Notwithstanding any provision of law to the contrary, clothing and footwear and
any item used or consumed to make or repair such clothing and which becomes a
physical component part of such clothing shall be exempt from the taxes imposed by this
section.
Section 1109(g) of the Tax Law provides, in part:
In the event that a county, city or school district located in the metropolitan
commuter transportation district . . . elects to provide the clothing and footwear
exemption authorized in paragraph one of subdivision (a) of section twelve hundred ten
of this chapter . . . the exemption provided by paragraph thirty of subdivision (a) of
section eleven hundred fifteen of this article shall be applicable in such portion of the
metropolitan commuter transportation district in which such county, city or school
district . . . is located. . . .
Section 1210(a)(1)(i) of the Tax Law provides, in part:

-2TSB-A-07(23)S
Sales Tax
August 27, 2007

Any local law, ordinance or resolution enacted by any city, county or school
district, imposing the taxes authorized by this subdivision, shall omit . . . the clothing and
footwear exemption provided for in paragraph thirty of subdivision (a) . . . of section
eleven hundred fifteen, unless such city, county or school district elects otherwise as
to . . . such clothing and footwear exemption. . . .
Pursuant to Chapter 82 of the Laws of 2007, effective September 1, 2007, section
1210(a)(1)(i) of the Tax Law will also provide that "Notwithstanding any provision of law to the
contrary, clothing and footwear and any item used or consumed to make or repair such clothing
and which becomes a physical component part of such clothing shall be exempt from sales and
compensating use taxes imposed by a city of one million or more."
Section 1115(a) of the Tax Law provides, in part:
Receipts from the following shall be exempt from the tax on retail sales imposed
under subdivision (a) of section eleven hundred five and the compensating use tax
imposed under section eleven hundred ten:
*

*

*

(3) Drugs and medicines intended for use, internally or externally, in the cure,
mitigation, treatment or prevention of illnesses or diseases in human beings, medical
equipment (including component parts thereof) and supplies required for such use or to
correct or alleviate physical incapacity, and products consumed by humans for the
preservation of health but not including cosmetics or toilet articles notwithstanding the
presence of medicinal ingredients therein or medical equipment (including component
parts thereof) and supplies, other than such drugs and medicines, purchased at retail for
use in performing medical and similar services for compensation.
*

*

*

(30) Clothing and footwear for which the receipt or consideration given or
contracted to be given is less than one hundred ten dollars per article of clothing, per pair
of shoes or other articles of footwear or per item used or consumed to make or repair
such clothing and which becomes a physical component part of such clothing.
Section 528.4(h)(2) of the Sales and Use Tax Regulations provides:
Medical services for human beings include but are not limited to the practices of
medicine, dentistry, physical therapy, chiropractic, nursing, podiatry, optometry and
radiology, whether performed by a private practitioner, clinical laboratory, hospital,
nursing home, ambulance service, clinic, or health maintenance facilities.

-3TSB-A-07(23)S
Sales Tax
August 27, 2007

Taxable Status of Medical Equipment and Supplies, Prosthetic Devices, and Related
Items, Publication 822 (6/01), identifies incontinence pants as medical equipment or supplies that
are exempt from tax under section 1115(a)(3) of the Tax Law unless purchased for use in
performing medical or similar services for compensation. Publication 822 also states in an
Endnote referring to incontinence pants and surgical stockings that:
These items are exempt from State and local sales and use taxes as medical
equipment unless they are purchased by a person for use in providing medical or similar
services for compensation. However, when these items are purchased for such use, they
are exempt from the State’s (4%) sales and use taxes as articles of clothing or footwear.
This exemption, however, does not apply to all locally imposed sales and use taxes. . . .
Technical Services Division Memorandum entitled Year-Round Sales and Use
Tax Exemption of Clothing, Footwear, and Items Used to Make or Repair Exempt Clothing,
March 29, 2006, TSB-M-06(6)S, identifies adult diapers as clothing that is eligible for the
exemption provided in section 1115(a)(30) of the Tax Law, and also indicates that adult diapers
may be exempt as medical equipment or supplies.
Opinion
Adult diapers and incontinence pants (which are similar in nature to adult diapers) are
considered to be both medical supplies and clothing. See Publication 822, supra, and
TSB-M-06(6)S, supra. For purposes of this Opinion, it is assumed that the nursing home is a
for-profit entity. A nursing home is a facility that is engaged in providing medical or similar
services for compensation. See Paul C. Maggio d/b/a Patchogue Nursing Ctr., Adv Op Comm
T & F, October 18, 1994, TSB-A-94(49)S and section 528.4(h)(2) of the Sales and Use Tax
Regulations. Therefore, purchases of adult diapers by a nursing home are not exempt from sales
tax pursuant to section 1115(a)(3) of the Tax Law. However, as adult diapers are considered to
be items of clothing eligible for the exemption provided in section 1115(a)(30) of the Tax Law,
purchases of adult diapers by a nursing home for less than $110 dollars per article are exempt
from the State's 4% sales and use tax. See Publication 822, supra, and TSB-M-06(6)S, supra.
The exemption in section 1115(a)(30) of the Tax Law does not apply to locally imposed
sales and use taxes unless the county or city imposing those taxes elected the exemption. (See
section 1210(a) of the Tax Law and Local Sales and Use Tax Rates on Clothing and Footwear,
Publication 718-C (5/07), for additional information.) The exemption also does not apply to the
⅜% sales and use taxes imposed by the State in the Metropolitan Commuter Transportation
District (MCTD), unless a county or city in the MCTD elects the exemption from its own local
taxes. (See section 1109(g) of the Tax Law.) The MCTD consists of New York City and the
counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester. Pursuant to
Chapter 82 of the Laws of 2007, effective September 1, 2007, sales of clothing in New York City
are fully exempt from the 4% local sales and use tax. However, sales of clothing costing $110 or

-4TSB-A-07(23)S
Sales Tax
August 27, 2007

more per article remain subject to the New York State 4% sales and use tax and the 3/8% sales
and use tax imposed by the State in the Metropolitan Commuter Transportation District.

DATED: August 27, 2007

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.