Are the "close-end" needles used with a portable nitrous-oxide nerve-pain-block device exempt from Texas sales tax as hypodermic needles, when sold to hospitals and clinics rather than directly to patients?

Plain-English summary

A medical technology company sells an FDA-approved, prescription-only portable pain treatment device that delivers a controlled dose of highly pressurized liquid nitrous oxide through "close-end" needles inserted next to a targeted nerve. As the liquid reaches the needle tip it undergoes a phase change and becomes very cold, causing a reversible nerve block (a process called Wallerian degeneration) that reduces pain — the gas then returns to the device, leaving nothing behind in the body. The company asked whether the close-end needles specifically are exempt from Texas sales tax.

The Comptroller ruled no exemption applies. The needles don't qualify as exempt hypodermic needles under § 151.313(a)(4), because a hypodermic needle is specifically defined as one adapted for removing or injecting material beneath the skin — but these close-end needles do neither; they merely channel a refrigerant chemical to the nerve and nothing (material) is left in or removed from the body. (The Comptroller noted several other needle types — anesthesiology, thin-wall tuohy, arterial, biopsy, blood collection — DO qualify when they're hollow-point and adapted for use with a hypodermic syringe, but this device's needles aren't that kind of needle.) The needles also don't qualify as an exempt therapeutic device under § 151.313(a)(6), even though they clearly serve a therapeutic pain-alleviation purpose, because that exemption is narrowly limited to devices purchased and used by the individual patient for whom they were prescribed — here, the device and needles are sold to and used by health care providers (doctors, clinics, hospitals) delivering the treatment, not directly purchased by patients, so the provider owes the tax.

What this means for you

Medical device manufacturers selling needle-based or injection-adjacent devices

Don't assume any needle used in a medical procedure automatically qualifies for the hypodermic needle exemption — the statutory definition is narrow and functional: it requires the needle to actually remove or inject material beneath the skin. A needle that merely delivers heat/cold or an energy effect (without leaving or removing material) falls outside that specific exemption, even if it's inserted into the body.

Health care providers purchasing prescription pain-treatment devices

This is a recurring pattern across STAR medical-device rulings: devices sold to and used by the provider (rather than purchased directly by the patient) generally can't rely on the therapeutic-device exemption, regardless of how clearly therapeutic the device's purpose is. Providers should expect to pay — and account for — sales tax on this category of equipment and disposables unless a different exemption (like a governmental or nonprofit exempt-entity certificate) independently applies.

Accountants and tax professionals

This ruling is a useful companion to other STAR rulings applying the same two-exemption framework (§ 151.313(a)(4)/(a)(6), Rule 3.284) to different medical devices — the same "purchased/used by the individual patient" requirement that defeats the therapeutic-device exemption here recurs across the STAR medical device rulings, and the hypodermic-needle definition's remove/inject-material requirement is the key functional test for needle-based devices specifically.

Common questions

Q: Are all needles used in medical devices exempt as "hypodermic needles"?
A: No — the exemption requires the needle to actually remove or inject material beneath the skin. Needles that merely deliver an effect (like refrigerant-based cooling) without leaving or removing material don't qualify, even certain specialized needle types like anesthesiology or biopsy needles only qualify when they're hollow-point and syringe-adapted.

Q: Why doesn't the therapeutic device exemption cover this pain treatment device?
A: That exemption requires the device be purchased and used by the individual patient for whom it was prescribed. Here, the device and needles are sold to and used by health care providers delivering the treatment, not purchased directly by patients.

Q: Is being FDA-approved and prescription-only enough to make a medical device tax-exempt?
A: No — FDA approval and prescription status don't determine Texas sales tax exemption; the device must independently meet one of the specific statutory exemption definitions (prosthetic, orthopedic, hypodermic needle/syringe, or therapeutic device purchased by the individual patient).

Q: Can another medical device company rely on this ruling for a similar device?
A: No. It binds the Comptroller only for the taxpayer and facts presented; a needle that does remove/inject material, or a device sold directly to patients, could be analyzed differently.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.313(a)(4) (hypodermic syringe/needle exemption); § 151.313(a)(6) (therapeutic device exemption)
• Tex. Tax Code § 151.051 (sales tax imposed); § 151.010 (taxable item); § 151.009 (tangible personal property)
• 34 Tex. Admin. Code § 3.284(a)(9)-(10) (hypodermic needle/syringe definitions); (a)(14) (therapeutic appliance/device definition); (d)(11)(C) (health care provider tax liability)

Cited prior guidance:

• STAR Accession No. 9311L1277G09 (Nov. 1, 1993) — qualifying specialized needle types (anesthesiology, thin-wall tuohy, arterial, biopsy, blood collection)
• Comptroller's Decision No. 108,253 (2015), referencing Comptroller's Decision No. 39,457 (2004) — therapeutic device exemption requires individual patient purchaser/user
• STAR Accession No. 201111249L (Nov. 7, 2011) — health care providers owe tax on therapeutic devices used in providing services

Source

• Landing page (STAR search): https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201903017L

Original ruling text

March 22, 2019

RE: Private Letter Ruling No. PLR 20181002082329

**, Taxpayer FEIN No. **

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE: (1)] We are responding to your request dated Sept. 10, 2018 and supplemental information dated Oct. 19, 2018. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of the ** pain treatment medical device, which consists of a handheld delivery device, close-end needles, and liquid nitrous oxide.

Facts Presented

** (Taxpayer) is a medical technology company that sells the ** pain treatment portable medical device (Device), which is FDA approved and bears the RX only symbol. The Device delivers a controlled dosage of liquid nitrous oxide to the end of close-end needles, which are applied to specific targeted nerve, by insertion in the body next to the targeted nerve. As the highly pressurized liquid travels from the Device to the needles, it undergoes a phase change becoming very cold. The gaseous nitrous oxide returns to the Device leaving nothing behind in the body. The cold pain treatment causes a reversible nerve block based on a process called Wallerian degeneration resulting in pain reduction.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are the close-end needles used in the Device exempt from Texas sales and use tax?

Ruling: No. The close-end needles are not exempt needles as contemplated under Section 151.313, and are taxable as therapeutic appliances or devices.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). A taxable item means tangible personal property and taxable services. Section 151.010 (Taxable Item). Tangible personal property means personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the sense in any other manner. Section 151.009 (“Tangible Personal Property”). Certain health care supplies are exempted from tax, including a hypodermic syringe or needle under Section 151.313(a)(4) (Health Care Supplies).

A hypodermic needle is defined as “a hollow needle adapted for use with hypodermic syringes” and a hypodermic syringe is defined as “a small syringe with a hollow needle adapted for use in removing or injecting material beneath the skin.” Rule 3.284(a)(9)-and (10) (Drugs, Medicines, Medical Equipment, and Devices). Anesthesiology, thin wall tuohy, arterial, biopsy, and blood collection needles qualify for exemption if they are hollow point and adapted for use with a hypodermic syringe. STAR Accession 9311L1277G09 (Nov. 1, 1993).

The close-end needles used on the Taxpayer’s pain treatment Device do not meet the definition of hypodermic needle. The close-end needles do not remove or inject material beneath the skin. Instead, the close-end needles channel a chemical from the Device to provide cold pain treatment to a targeted nerve. The gaseous nitrous oxide returns to the Device leaving nothing behind in the body.

A therapeutic appliance or device is defined as an appliance or device that is designed to alleviate pain or for use during the treatment or cure of human sickness, disease, suffering or deformity. Rule 3.284(a)(14). Certain therapeutic appliances are exempted from tax “if dispensed or prescribed by a licensed practitioner of the healing arts, when those items are purchased and used by an individual for whom the items listed in this subdivision were dispensed or prescribed.” Section 151.313(a)(6).

The purpose of the pain treatment Device and the close-end needle meets the definition of a therapeutic device or appliance used to alleviate nerve pain. However, Section 151.313(a)(6) does not recognize a general exemption for all sales or purchases of therapeutic appliances or devices. The exemption applies only if the therapeutic appliance, device, or related supply is dispensed or prescribed by a licensed practitioner of the healing arts, and only when the items are purchased and used by an individual for whom the items were dispensed or prescribed. Comptroller’s Decision No. 108,253 (2015), referencing Comptroller’s Decision No. 39,457 (2004).

Pursuant to Rule 3.284(d)(11)(C), health care providers, such as doctors, clinics, hospitals or other institutions providing health care or medical services to individuals owe tax on therapeutic appliances, devices, and related supplies they use in providing nontaxable health care and medical services. STAR Accession No. 201111249L (Nov. 7, 2011). Taxpayer’s pain treatment medical Device and the attached close-end needles are used by health care providers, not by the patient, to provide medical services and are subject to Texas sales and use tax.

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20181002082329.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

1. Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.