A blood/plasma products company asked which supplies used to collect blood and process it into blood products — collection bags, pooling bags/bottles, saline, separation-device disposable sets, reagents, and related machinery — are taxable versus exempt for Texas sales and use tax purposes.

Plain-English summary

A company that collects blood and manufactures blood/plasma products asked the Comptroller which supplies used in its manual and automated collection and processing operations are taxable versus exempt from Texas sales and use tax.

Taxable collection supplies: Y-sets and 500 ML and 600 ML collection bags are taxable. These items are used before processing or production operations begin — that is, during the collection of blood from donors — so they don't qualify for a processing-related exemption. See Rule 3.300(a)(9).

Exempt items:

• Pooling bags and pooling bottles are exempt as containers under Rule 3.314, but only when the plasma is actually sold in them. If the same type of bag or bottle is instead used just for collection, that use is taxable.
• Saline (500 ML and 1000 ML) is exempt as a drug under Rule 3.284.
• Plasmacell-C separation device disposable set is exempt under Rule 3.300(d)(6) and (d)(7).
• Reagents are exempt under Rule 3.300(d)(6).
• Plasmacell-C itself is exempt under Rule 3.300(d)(7)(A).

Machinery: Equipment used to collect and test donors' blood before processing is not manufacturing or processing equipment and is taxable. However, a centrifuge is treated as exempt processing equipment if it's used to separate donor blood into components for sale. Intraplant transportation equipment — specifically, the extractor — is expressly taxable under Rule 3.300(c)(3).

What this means for you

Blood and plasma product manufacturers

The line the Comptroller draws is when and how an item is used, not just what it is. The same type of bag or bottle can be taxable collection supply or an exempt sale container depending on whether the finished plasma product is actually sold in it. Track which containers are used purely to collect blood from donors (taxable) versus which ones are the actual sale packaging for the finished product (exempt under Rule 3.314).

Medical and biologics manufacturers generally

Drugs used in the process (like saline here) can be separately exempt under Rule 3.284 regardless of how the rest of the process is taxed. And equipment classification matters: the same category of machine (a centrifuge) can flip from taxable to exempt depending on whether it performs a true separation/processing function on goods destined for sale, versus pre-processing collection or testing.

Equipment purchasers and accountants

Don't assume all "processing area" equipment is exempt. This letter draws a specific carve-out taxing intraplant transportation equipment (the extractor) even in a manufacturing setting, under Rule 3.300(c)(3).

Common questions

Q: Are blood collection bags (Y-sets, 500 ML/600 ML collection bags) exempt as manufacturing supplies?
A: No. They're taxable because they're used before processing or production begins, under Rule 3.300(a)(9).

Q: Are pooling bags and pooling bottles exempt?
A: Only when the plasma is sold in them — then they qualify as exempt containers under Rule 3.314. If used for collection instead, that use is taxable.

Q: Is saline used in blood/plasma processing taxable?
A: No, saline (500 ML and 1000 ML) is exempt as a drug under Rule 3.284.

Q: Is a centrifuge exempt processing equipment?
A: It is exempt if used to separate donor blood into components for sale. Equipment used only for collecting or testing donor blood before processing is taxable.

Q: What about the Plasmacell-C separation device, its disposable set, and reagents?
A: All are exempt — the Plasmacell-C separation device disposable set and Plasmacell-C itself under Rule 3.300(d)(6) and (d)(7)(A), and reagents under Rule 3.300(d)(6).

Q: Can I rely on this letter for my own blood/plasma processing operation?
A: No. This opinion is based on the facts presented to the Comptroller, and different facts could produce a different result. Under 34 Tex. Admin. Code Rules 3.1 and 3.10, only the taxpayer who received this letter can rely on it for detrimental reliance purposes.

Citations and references

• 34 Tex. Admin. Code § 3.300(a)(9) — collection supplies used before processing/production begins are taxable
• 34 Tex. Admin. Code § 3.300(c)(3) — intraplant transportation equipment (extractor) is taxable
• 34 Tex. Admin. Code § 3.300(d)(6) — exemption for the Plasmacell-C separation device disposable set and reagents
• 34 Tex. Admin. Code § 3.300(d)(7)(A) — exemption for the Plasmacell-C
• 34 Tex. Admin. Code § 3.314 — container exemption (pooling bags/bottles, when plasma is sold in them)
• 34 Tex. Admin. Code § 3.284 — drug exemption (saline)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207L1184B11

Original ruling text

July 8, 1992

Dear **:

Thank you for your letter of May 14, 1992, concerning the taxability of
products used in the collection of blood and in the production of blood
products.

The following supplies used in the manual and automated processes are taxable:

• Y-sets
• 500 ML collection bags
• 600 ML collection bags

The above items are used before the processing or production operations begin.
See Rule 3.300(a)(9).

The following supplies used in the manual and automated processes are exempt:

• pooling bags - exempt as a container under Rule 3.314 when the plasma is
  sold in them; collection use is taxable
• pooling bottles - exempt as a container under Rule 3.314 when the plasma is
  sold in them; collection use is taxable
• saline (500 ML and 1000 ML) - exempt as a drug under Rule 3.284
• Plasmacell-C separation device disposable set - exempt vendor Rule
  3.300(d)(6)(7)
• reagents - exempt under Rule 3.300(d)(6)
• Plasmacell-C - exempt under Rule 3.300(d)(7)(A)

The following supplies are taxable because they are used in collection:

• Y-sets
• 500ML collection bag
• 600 ML collection bag

The items listed under machinery appear to be used in the collection and
testing of donors' blood prior to processing. These items are not manufacturing
or processing equipment and are taxable. However, the centrifuge will be
considered processing equipment if it is used to separate donor blood into
components for sale.

Rule 3.300(c)(3) specifically taxes intraplant transportation equipment
(extractor).

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call toll free 1-800-252~5555 if you have any questions or need more
information. You may write to Tax Administration Division, Comptroller of
Public Accounts.

Sincerely

Eddie C. Washington
Tax Administration Division