Is a bio-absorbable dental tissue-regeneration device sold to dentists exempt from New York sales tax as a prosthetic aid or a medical supply?

Plain-English summary

A manufacturer (John O. Butler Company) planned to sell dentists a "Guided Tissue Regeneration" (GTR) device — a foil-thin, perforated, bio-absorbable device with pre-attached sutures, placed under the gums to guide regeneration of periodontal tissue lost to disease. Unlike an older competing device, the GTR device isn't removed; the body hydrolyzes it over time. The manufacturer asked whether selling it to dentists is exempt as a prosthetic aid under 20 NYCRR § 528.5.

The Department said the device is not a prosthetic aid, but is a medical supply — and that distinction controls the tax result.

• Why not a prosthetic aid. A prosthetic aid (§ 1115(a)(4); § 528.5) must replace a missing body part or the function of a permanently inoperative body part. The GTR device guides tissue to regrow; it doesn't replace a body part. The Department relied on Dental Society of the State of New York v. State Tax Commission (cavity-filling materials, though implanted, are not prosthetic aids) and Alcon Surgical, Inc., TSB-A-92(43)S (a dissolving corneal shield was a medical supply, not a drug).
• It's a medical supply under § 1115(a)(3). Medical supplies are exempt — but with a critical exception: supplies purchased at retail for use in performing medical or similar services for compensation are not exempt (§ 1115(a)(3); § 528.4(g)–(h)). Dentistry is such a service. So when a dentist buys the GTR device to use in compensated dental treatment, the sale is taxable.
• The exemption certificate route. A sale of the device to a hospital or other organization that qualifies under § 1116(a) is exempt — even if that organization uses the device in performing services for compensation — provided it gives a properly completed exemption certificate.

What this means for you

Manufacturers and distributors of medical/dental devices

Don't assume an implanted device is a tax-exempt "prosthetic aid." New York reserves that category for items that replace a body part or its function. A device that heals, regenerates, or treats — like this GTR device or a dissolving corneal shield — is a medical supply, which carries a big catch: it's taxable when sold to a practitioner who uses it in services for compensation. Expect to charge tax on sales to private dentists and physicians.

The compensation exception, in practice

Medical and dental supplies lose their exemption when a for-profit practitioner buys them to use in paid patient care (§ 528.4(h)). The clean exemption path is a sale to a § 1116(a) exempt organization (e.g., a hospital), which stays exempt even for compensated services — but only against a valid exemption certificate.

Accountants and tax professionals

The dividing line is § 1115(a)(4) (prosthetic aids / artificial devices that replace a body part) versus § 1115(a)(3) (medical equipment and supplies), with § 528.4(g)–(h)'s "services for compensation" exception doing the real work. Dental Society and Alcon Surgical (TSB-A-92(43)S) anchor the classification of implanted-but-non-replacing devices as supplies, not prosthetics.

Common questions

Q: Is the GTR dental device a tax-exempt prosthetic aid?
A: No. The Department held it's a medical supply, not a prosthetic aid, because it guides tissue regeneration rather than replacing a missing or permanently inoperative body part.

Q: So is it exempt when sold to a dentist?
A: No. As a medical supply, it's exempt in general but not when purchased at retail for use in performing medical or dental services for compensation. A dentist buying it for paid treatment pays tax.

Q: When would a sale of the device be exempt?
A: When sold to a hospital or other organization qualifying under Tax Law § 1116(a) that furnishes a properly completed exemption certificate — that sale is exempt even if the device is used in compensated services.

Q: Why isn't an implanted device automatically a prosthetic aid?
A: Because a prosthetic aid must replace a body part or its function. The Department cited Dental Society (cavity-filling materials, though implanted, aren't prosthetic aids) and Alcon Surgical (a dissolving corneal shield is a medical supply).

Q: Can another manufacturer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described; another taxpayer with different facts cannot rely on it.

Citations and references

Statutes and authorities:

• Tax Law § 1115(a)(3) (exemption for drugs, medicines, medical equipment and supplies; exception for supplies used in performing services for compensation)
• Tax Law § 1115(a)(4) (exemption for prosthetic aids, hearing aids, eyeglasses, and artificial devices)
• Tax Law § 1116(a) (exempt organizations)
• 20 NYCRR § 528.4 (drugs, medicines, medical equipment and supplies; taxable when used in services for compensation)
• 20 NYCRR § 528.5 (prosthetic aids; must replace a body part or its function)
• Dental Society of the State of New York v. State Tax Commission, 110 A.D.2d 988 (filling materials not prosthetic aids)
• Alcon Surgical, Inc., Adv Op Comm T&F, TSB-A-92(43)S (dissolving corneal shield is a medical supply)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_77s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (77) S
Sales Tax
November 4, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920728B

On July 28, 1992, a Petition for Advisory Opinion was received from John O. Butler
Company, 4635 W. Foster Avenue, Chicago, Il 60630.
The issue raised by Petitioner, John O. Butler Company, is whether Petitioner's sales of a
bio-medical device to dentists for reconstructive surgery resulting from periodontal disease is exempt
from sales tax as a prosthetic aid within the meaning of Section 528.5 of the New York State Sales
and Use Tax Regulations.
The bio-medical device which will be introduced in New York State will be sold to dentists
(periodontists and general practitioners) for reconstructive surgery resulting from periodontal
disease. In the industry, the bio-medical device is referred to as a "Guided Tissue Regeneration"
(hereinafter "GTR") device and is subject to FDA approval as a class II medical device defined by
a 510K submission.
The GTR device is a foil-thin, perforated device with pre-attached sutures which are used to
fasten around the neck of a tooth. The GTR device is placed beneath a patient's gums in the area
where bone and periodontal ligament loss occurred. The purpose of the device is to enable and guide
the regeneration of periodontal tissues lost due to disease.
The primary difference between the GTR device and the only other device currently on the
market is that the GTR device is bio-absorbable and is not removed from the patient's mouth. Rather,
the body hydrolyzes the device over time. The device is made of a polylactic acid.
Section 1105(a) of the Tax Law imposes sales tax upon "[T]he receipts from every sale of
tangible personal property, except as otherwise provided in this article."
Sec. 1115. Exemptions from sales and use taxes.--(a) 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
TP-9 (9/88)

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TSB-A-92 (77) S
Sales Tax
November 4, 1992
component parts thereof) and supplies, other than such drugs and medicines,
purchased at retail for use in performing medical and similar services for
compensation.
(4) Prosthetic aids, hearing aids, eyeglasses and artificial devices and
component parts thereof purchased to correct or alleviate physical incapacity in
human beings. (emphasis added)
Section 528.4 of the Sales and Use Tax Regulations, provides, in part, as follows:
(a) Exemption
(1) Drugs and medicines intended for the 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 are exempt.

(e)

*
Medical equipment

*

*

(1) Medical equipment means 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.
(g) Supplies
(1) Supplies used in the cure, mitigation, treatment or prevention of illnesses or
diseases or for the correction and alleviation of physical incapacity are exempt.
*
*
*
(2) Medical supplies are not exempt if purchased by a person performing medical
or similar services for compensation. (See subdivision (h) of this section.)
(h) Taxable medical equipment and supplies
(1) Medical equipment and supplies purchased for use in performing medical or
similar services for compensation are not exempt from tax.

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TSB-A-92 (77) S
Sales Tax
November 4, 1992

*
*
*
Example 4: Dental supplies such as porcelain, mercalloy, gold, silver, acrylic
denture base, amalgam, composite resin, silicate, and dental floss are not exempt
when purchased by a dentist who will use them in performing a dental service for
compensation.
(2) Medical services for human beings include but are not limited to the practices of
medicine, dentistry, physical therapy, chiropractic, nursing, podiatry, optometry ad
and whether performed by a private practitioner, clinical laboratory, hospital, nursing
home, ambulance service, clinic, or health maintenance facilities.
(3) It is immaterial whether the compensation is paid to the practitioner or institution
by the patient or another source.
Section 528.5 of the Sales and Use Tax Regulations provides, in part, as follow:
§ 528.5 Prosthetic aids
(a) Exemption. Prosthetic aids, hearing aids, eyeglasses and artificial devices
and component parts thereof, purchased to correct or alleviate physical incapacity in
human beings are exempt from the tax.
(b) Qualification
(1) In order to qualify as a prosthetic aid, a hearing aid, eyeglasses or an artificial
device, the property must either completely or partially replace a missing body part
of the function of a permanently inoperative or permanently malfunctioning body
part and must be primarily and customarily used for such purposes and not be
generally useful in the absence of illness, injury or physical incapacity.
Example 1: Artificial hands, arms, legs, false teeth, etc. are exempt.
Example 2: Breast forms for post-mastectomy patients are exempt from tax.
Garments with permanently built-in breast forms intended for use by post­
mastectomy patients are also exempt as a prosthesis. However, brassieres worn with
breast forms are not exempt.
*
*
*
Example 4: A crown which is permanently attached to a tooth by a dentist is exempt.
(emphasis added)

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TSB-A-92 (77) S
Sales Tax
November 4, 1992

The Appellate Division in Dental Society of the State of New York v. New York State Tax
Commission, 110 A.D.2d 988 held that cavity filling materials, although implanted in patients' teeth,
were not prosthetic aids exempt from sales tax under Section 1115(a)(4) of the Tax Law.
In Alcon Surgical, Inc., Adv Op Comm T&F, May 27, 1992, TSB-A-92(43)S the
Commissioner advised the corneal shield used to accelerate healing in postoperative or traumatic
corneal injuries, refractive surgical procedures and other corneal conditions which subsequently
dissolved in the eye was not a drug or medicine but a medical supply for purposes of the exemption
contained in Section 1115(a)(3) of the Tax Law since it was a therapeutic device similar to
ophthalmic suture materials.
The GTR device which fastens around the neck of a tooth to guide in the regeneration of
periodontal tissues lost due to disease and later dissolves in the patient's mouth is not a prosthetic
aid but is a medical supply for purposes of the exemption contained in Section 1115(a)(3) of the Tax
Law. This opinion is supported by Section 1115(a)(3) and (4) of the Tax Law, Sections 528.4 and
528.5 of the Sales and Use Tax Regulations, Dental Society of the State of New York v. New York
State Tax Commission, supra, and Alcon Surgical, Inc., supra. Accordingly, pursuant to Section
1115(a)(3) of the Tax Law and Section 528.4 of the Sales and Use Tax Regulations the receipts from
the sale of the GTR device to other than those purchasing the device at retail for use in performing
medical or dental services for compensation is exempt from sales tax.
It is noted that the sale of such GTR device to a hospital or other organization qualifying for
exemption under Section 1116(a) of the Tax Law would be exempt from the imposition of sales tax
even if such entity was using the device in performing medical services for compensation provided
they provide a properly completed exemption certificate.

DATED: November 4, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.