Many states exempt food, medicine, and medical supplies—items that are generally considered necessities—from sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. . On the surface, this seems like a simple, straightforward policy.
However, creating numerous exemptions and taxing different items at different rates leads to increased complexity and compliance costs for businesses, as well as confusion for consumers. It’s not always clear which goods qualify for exemption, even in seemingly well defined categories like food and medicine.
Case in point: A company that sells visual aids, including Braile software and magnification devices, recently asked New York State whether the devices qualified for the state’s sales tax exemption for medical devices. The Department of Taxation and Finance issued an advisory opinion stating that the visual aids were prosthetic devices and therefore tax-exempt.
However, the exemption is somewhat complicated. Braille typewriters are tax-exempt, but calculators and books for the visually impaired are only partially exempt:
That portion of the price of braille books … which is attributable to those features of the books … that enable the affected person to use them, if separately stated on the bill, is excluded from the amount upon which the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. is computed. In determining the reasonableness of the amount of the exclusion, like items must be compared, such as, a comparison of the price of a hard cover braille edition of a book with the same hard cover edition of a nonbraille book. … Calculators which contain talking devices that are intended for the use of blind people are subject to tax. However, that portion of the price of the calculator attributable to the talking device is exempt from tax … .
Businesses must not only determine which items qualify, but also keep up with changing rules.
While guide dogs have always been tax-exempt in New York, in 1995 the state expanded the exemption to cover other service dogs used by the disabled, as well as items used for the care of these dogs, including food and treats, blankets, and grooming services.
While the desire to make medical devices affordable for everyone is commendable, there is an unavoidable price to pay in tax compliance costs any time a class of goods or services is exempted from taxation.Share