Is a heart/lung machine used during surgery exempt from Texas sales tax as a prosthetic device?

Subject

Heart/Lung Machine As An Exempt Prosthetic Device

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9310L1267B04

Plain-English Summary

This letter, from the Tax Administration Division to an auditor in the McAllen Audit Office, addresses whether a heart/lung machine is exempt from Texas sales and use tax. The taxpayer at issue provides equipment that replaces a patient's cardio-pulmonary/circulatory functions during surgery or while a patient awaits a donor or other surgical procedures. The letter notes the machine may be used on either a temporary or long-term basis.

The Comptroller concluded that the heart/lung machine will be considered a prosthetic device because it performs the function of a vital organ — both the heart and the lung. Under Texas Tax Code Section 151.313(a)(4), prosthetic devices, along with their supplies or replacement parts, are exempt from tax. The letter specifically clarifies that the fact some of the items used with the machine are disposable does not make them subject to taxation.

At the same time, the letter draws a broader distinction: taxes are due on purchases by medical providers of therapeutic appliances or devices generally, and that taxability does not turn on whether the process is meant to save a life rather than being used in elective surgery. The letter states plainly that the exemptions provided by the legislature are not tied to which measures prevent death, nor to the identity of the party that ultimately bears the cost of the tax.

What This Means For You

If you sell, lease, or service heart/lung machines used in surgical or medical settings: This letter supports treating the machine itself — along with its supplies and replacement parts — as an exempt prosthetic device under Section 151.313(a)(4), because it substitutes for the function of a vital organ. Disposable components used with the machine do not lose that exempt treatment simply because they are single-use.

If you are a medical provider purchasing therapeutic appliances or devices more broadly: Do not assume that a device is exempt just because it is used in life-saving or emergency care. The letter is explicit that taxability does not depend on whether the equipment is used to save a life or in elective surgery — the exemption analysis turns on whether the specific item meets a defined exemption (like the prosthetic device exemption), not on the purpose or urgency of its use.

If you are structuring a tax position around "who pays": The letter forecloses an argument based on who ultimately bears the economic cost of the tax. The exemptions provided by the legislature are not tied to the identity of the party bearing the cost, so that argument will not change the taxability analysis.

Q&A

Q: Is a heart/lung machine taxable or exempt under Texas sales tax law?
A: The letter states it will be considered a prosthetic device, exempt under Texas Tax Code Section 151.313(a)(4), because it performs the function of a vital organ (both heart and lung).

Q: Does it matter whether the heart/lung machine is used temporarily or long-term?
A: No. The letter notes the machine may be used on a temporary or long-term basis without changing the analysis that it is a prosthetic device.

Q: Are disposable supplies used with the machine taxable?
A: No. The letter states that the fact some items are disposable will not render them subject to taxation, since the exemption for prosthetic devices extends to their supplies or replacement parts.

Q: Are all therapeutic appliances or devices purchased by medical providers exempt?
A: No. The letter states that taxes are due on purchases by medical providers of therapeutic appliances or devices, regardless of whether the process is used to save lives rather than in elective surgery.

Q: Does the identity of who ultimately pays for the equipment affect whether tax is due?
A: No. The letter states that the exemptions provided by the legislature are not tied to the identity of the ultimate party that bears the cost of such taxation.

Original ruling text

Date: October 19, 1993

TO: RAMIRO J. GARZA, AUDITOR, MCALLEN AUDIT OFFICE

FROM: KEVIN KOLLER, TAX ADMINISTRATION DIVISION

SUBJECT: *** TAXPAYER NO. ***

*** provides equipment that replaces the
patient's cardio pulmonary/circulatory functions during surgery or
awaiting a donor or surgical procedures. The heart/lung machine may be
used on a temporary or long-term basis.

The machine will be considered a prosthetic device as it performs the
function of a vital organ (both heart and lung) of the body. Texas Tax
Code Section 151.313(a)(4) exempts prosthetic devices and their
supplies or replacement parts. The fact that some items are disposable
will not render them subject to taxation.

Taxes are due on purchases by medical providers of therapeutic
appliances or devices. These devices are taxable regardless of whether
the process is to save lives rather than used in elective surgery. The
exemptions provided by the legislature are not tied to which measures
prevent death or the identity of the ultimate party that bears the
cost of such taxation.

NOTE: Previous Accession Number 9308193L.4 and/or 9308193L