Does a home-oxygen supplier have to collect sales tax when it rents regulators, humidifiers, ring stands and carts to private patients to dispense medical oxygen at home?

Plain-English summary

Nichols Oxygen Service, Inc. rents regulators, humidifiers, ring stands and carts that private patients use to dispense medical oxygen in their homes. It asked whether it must collect sales tax on those rentals.

The Department held the rentals are exempt — Nichols does not collect tax.

• A rental is normally a taxable sale. Section 1105(a) taxes retail sales of tangible personal property, and § 1101(b)(5) treats a rental as a "sale." So the starting point is that renting equipment is taxable.
• But medical equipment is exempt. Section 1115(a)(3) exempts "medical equipment (including component parts thereof) and supplies." Under 20 NYCRR 528.4(e), that means apparatus and devices intended for use in the cure, mitigation, treatment or prevention of illness — provided they are primarily and customarily used for medical purposes and not generally useful in the absence of illness, injury or physical incapacity.
• These items qualify. The regulators, humidifiers, ring stands and carts are used to dispense oxygen for medical purposes and meet the definition of exempt medical equipment.
• One key limit — who's renting matters. The exemption does not apply if the equipment is purchased (or rented) by a person performing medical or similar services for compensation. Because Nichols rents directly to patients (not to a paid care provider), the exemption holds and no tax is collected.

What this means for you

Home medical equipment rented to patients can be exempt — including the accessories that make it work. The exemption reaches the device and its component parts and supplies, so items like regulators, humidifiers and stands used to deliver oxygen ride along with the exemption when rented to the patient.

The "generally useful" test is the gatekeeper. Equipment qualifies only if it's primarily and customarily medical and not generally useful when someone isn't sick or injured. Oxygen-dispensing hardware clears that bar; general-purpose items a healthy person could use do not.

Watch who the customer is. Sell or rent the same equipment to a provider furnishing medical services for compensation and the exemption is lost — that buyer owes tax. The exemption is designed for the patient/end user, not the paid caregiver.

Common questions

Q: Isn't a rental always taxable in New York?
A: Rentals are treated as sales (§ 1101(b)(5)) and are taxable unless an exemption applies. Here the § 1115(a)(3) medical-equipment exemption applies, so these rentals aren't taxed.

Q: Do the humidifiers, stands and carts get the exemption too, or just the oxygen apparatus?
A: They qualify. The Department treated the regulators, humidifiers, ring stands and carts used to dispense the oxygen as exempt medical equipment.

Q: Would I collect tax if I rented this gear to a nursing home or paid caregiver instead of the patient?
A: Potentially yes. The exemption doesn't apply to equipment acquired by a person performing medical or similar services for compensation (20 NYCRR 528.4(e)(4)). Renting to the patient is what keeps it exempt.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(5) — a "sale" includes a rental
• Tax Law § 1115(a)(3) — exemption for medical equipment, component parts and supplies
• 20 NYCRR 528.4(e) — medical equipment must be primarily and customarily used for medical purposes, not generally useful absent illness, and is not exempt if purchased by a person performing medical services for compensation

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_16s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81 (16) S
Sales Tax
September 1, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810527C

On May 27, 1981 a Petition for Advisory Opinion was received from Nichols Oxygen
Service, Inc., Rte. 9G, R.D. 1 #499, Hyde Park, New York 12538.
The issue raised is whether sales tax is required to be collected on the rental of regulators,
humidifiers, ring stands and carts required to dispense medical oxygen to private patients in their
homes.
Section 1105(a) of the Tax Law imposes a tax on "The receipts from every retail sale of
tangible personal property, except as otherwise provided in this article." Section 1101(b)(5) of the
Tax Law defines the terms "sale, selling or purchase" to include rentals. However, Section
1115(a)(3) of the Tax Law exempts from tax certain " . . . medical equipment (including component
parts thereof) and supplies . . . . "
The Sales and Use Tax Regulations provide that exempt medical equipment includes "(1).
. . machinery, apparatus and other devices (other than prosthetic aids, hearing aids, eyeglasses and
artificial devices which qualify for exemption under section 1115(a)(4) of the Tax Law), which are
intended for use in the cure, mitigation, treatment or prevention of illnesses or diseases or the
correction or alleviation of physical incapacity in human beings. (2) To qualify such equipment must
be primarily and customarily used for medical purposes and not be generally useful in the absence
of illness, injury or physical incapacity. . . . (4) Medical equipment is not exempt if purchased by a
person performing medical or similar services for compensation. . . . " 20 NYCRR 528.4(e).
The regulators, humidifiers, ring stands and carts rented by Petitioner to private patients for
use in dispensing oxygen for medical purposes constitute medical equipment which is exempt from
sales tax pursuant to the provisions of section 1115(a)(3) of the Tax Law. Therefore, Petitioner is
not required to collect sales tax on the rental of this equipment to persons who are not performing
medical services for compensation.

DATED: August 14, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR