Texas Comptroller of Public Accounts    STAR System


201209577L



September 28, 2012


*************
*************
*************

Re: Corrected letter ruling - 10243859 -Environmental Repair Letter Ruling

Dear *************:

A recent inquiry concerning the exemption from tax, as provided in Tex. Tax 
Code Section 151.338, for labor to repair, maintain, restore and remodel 
Ultrasound equipment has led us to reconsider the response provided to your 
request of July 26, 2010 regarding the taxability of services to repair, 
maintain, restore and remodel diagnostic imaging and therapeutic equipment in 
Texas.

Our previous response erroneously included Ultrasound equipment in the group of 
equipment subject to regulation pursuant to the Texas Radiation Control Act, 
Tex. Health & Safety Code Section 401.0005. This led us to mistakenly conclude 
that Ultrasound equipment was eligible for the sales tax exemption found in 
Section 151.338.

Additional research, based on information available on the DSHS web site, has 
determined that Ultrasound equipment, as well as Magnetic Resonance Imaging 
(MRI) equipment, DO NOT use radiation or radioactive materials. This 
information was confirmed with personnel at the Texas Department of State 
Health Services (DSHS), along with confirmation that the Radiation Control Act 
as administered by DSHS provides no oversight or regulation of persons 
repairing, maintaining, restoring or remodeling Ultrasound equipment and 
Magnetic Resonance Imaging (MRI) equipment.

The response provided in this letter restates the original information and 
ruling provided with the exception of the guidance concerning Ultrasound 
equipment. This letter supersedes and replaces letter ruling 10243859 dated 
Sept. 21, 2010 (STAR Accession 201009943L), as well as the December 2011 Tax 
Policy News article, titled “Exemption for Labor When Repair, Maintenance or 
Remodeling is Mandated by Law” (STAR Accession 201112317L).

The correction regarding Ultrasound equipment is effective as of the date of 
this letter and applies on a prospective basis. All refund requests related to 
the repair, maintenance, restoration and remodeling of equipment subject to the 
Radiation Control Act received after Sept. 28, 2012 will be governed by this 
letter. This corrected response does not impact any valid refund requests that 
have been submitted as of this date.

Facts Presented

************* (“COMPANY A”), which is based in CITY, Tennessee, provides 
hospital and health care services throughout the United States. Through 
multiple affiliates at various locations throughout Texas, COMPANY A 
leases or owns and operates diagnostic imaging and therapeutic equipment. 
Such equipment includes computed tomography (“CT”), x-ray radiographic 
and/or fluoroscopic (“XR” and “XF”), cardiac catheterization and similar 
vascular (“XV”), mammography (“MM”), gamma camera and other nuclear medicine 
(“NM”), and ultrasound (“UL”) equipment. The foregoing equipment emits 
radiation as part of its ordinary operation. (Note, CT, XR, XF, XV, MM, 
NM and UL are abbreviations used by COMPANY B to classify different 
categories (called “modalities”) of equipment. These abbreviations are 
not necessarily used by other vendors.)

Different types of imaging and therapeutic equipment are composed of different 
component parts. Common elements, however, of imaging and therapeutic 
equipment will typically include an x-ray tube, filters, detectors, power 
supply, operator’s workstation, and in some cases viewing equipment (resembling 
a television), printers and a table upon which the patient is positioned for 
examination or treatment. The equipment is often linked together by network 
cables and may include routing equipment for communication among the various 
pieces. More complex equipment is typically operated via computer software 
that directs and controls the equipment.

************* (“COMPANY B”) is under contract with COMPANY A to maintain and 
repair COMPANY A’s diagnostic imaging and therapeutic equipment. The services 
are provided both on a scheduled and periodic basis and as needed. COMPANY A 
also purchases repair and maintenance services from other vendors, which in 
the past have included COMPANY C, COMPANY D and COMPANY E. COMPANY A pays sales 
and use taxes on repair and maintenance of diagnostic imaging and therapeutic 
equipment.

Applicable Law

The repair, remodeling, maintenance and restoration of tangible personal 
property are taxable services. Tex. Tax Code Section 151.0101(a)(5). However, 
Tex. Tax Code Section 151.338 provides:

The services involved in the repair, remodeling, maintenance, or restoration of 
tangible personal property are not taxable under this chapter if the repair, 
remodeling, maintenance, or restoration is required by statute, ordinance, 
order, rule, or regulation of any commission, agency, court, or political, 
governmental, or quasi-governmental entity in order to protect the environment 
or to conserve energy.

Equipment that emits radiation is subject to regulation pursuant to the Texas 
Radiation Control Act. Tex. Health & Safety Code Section 401.0005 et seq. The 
stated purpose of the Act is to “ensure effective regulation of sources of 
radiation” to protect occupational and public health and safety and the 
environment. Tex. Health & Safety Code Section 401.002.

Pursuant to the authority granted by the Act, DSHS operates the “Radiation 
Control Program”, through which, DSHS licenses owners and users of 
radiation-emitting equipment and regulates their conduct. Owners and users of 
relevant equipment are subject to inspection and penalties for failure to 
properly maintain and repair such equipment. In addition, the operation of 
diagnostic and imaging equipment that emits radiation is subject to regulation 
by DSHS and the operators must be licensed medical physicists or medical 
radiologic technologists, as applicable, in order to operate such equipment 
lawfully in Texas. The licensing and oversight regime is intended to protect 
health care providers, patients and the general public from the environmental 
hazards presented by diagnostic imaging and therapeutic equipment that emits 
radiation.

Rulings Requested

(1) The exemption provided by Tex. Tax Code Section 151.338 applies to services 
to repair, remodel, maintain and restore the following types of diagnostic 
imaging and therapeutic equipment to the extent the services are required by 
the DSHS pursuant to the Radiation Control Program: computed tomography 
(“CT”), x-ray radiographic and/or fluoroscopic (“XR” and “XF”), cardiac 
catheterization and similar vascular (“XV”), mammography (“MM”), bone 
densitometers, gamma camera and other nuclear medicine (“NM”), and ultrasound 
(“UL”) equipment.

Response: The Comptroller’s office, through discussion with representatives 
of DSHS, has verified that due to environmental concerns, medical service 
providers operating radiation machines must, under state and federal law, 
maintain radiation equipment within manufacturer specifications. Therefore, 
the repair, remodeling, maintenance, or restoration of diagnostic imaging or 
therapeutic equipment subject to oversight under the Radiation Control Program 
administered by DSHS; or, a similar program or statute, ordinance, order, rule, 
or regulation of any commission, agency, court, or political, governmental, or 
quasi-governmental entity in order to protect the environment qualifies for the 
exemption found under Tax Code Section151.338.

Since neither the DSHS nor any other regulatory body presently mandates the 
repair, remodeling, maintenance or restoration of Magnetic Resonance Imaging 
(“MR” or “MRI”) equipment, or Ultrasound (“UL”) equipment, the exemption 
provided by Tax Code Section 151.338 does not apply to services performed on 
either MRI or Ultrasound equipment.

(2) The exemption applies to services performed on a component part of an 
integrated unit of qualifying diagnostic imaging or therapeutic equipment, 
which may include an x-ray tube, x-ray tube, filters, detectors, power supply, 
operator’s workstation, viewing equipment, printer, patient table, networking 
equipment, associated computer software and/or other components.

Response: This is correct. Please note that the exemption under 151.338 
applies to charges for labor associated with the repair, remodeling, 
maintenance, or restoration of component part of an integrated unit of 
qualifying equipment and not to tangible personal property used or consumed 
during the service. Therefore, the labor charges must be separately stated from 
any charges for materials or replacement parts, etc. Under a separated 
contract, the service provider should collect tax on the separately stated 
charge for materials but may accept an exemption certificate in lieu of tax on 
the charge for labor. If the charges for such services are billed to consumers 
as a lump sum, then the entire lump-sum charge is presumed taxable.

Complete Texas sales tax information, including rules, statutes, publications, 
and frequently asked questions can be found on the Sales and Use Tax web page 
at: http://window.state.tx.us/taxinfo/sales/.

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78711-3528.

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Regards,


Tax Policy Division
Comptroller of Public Accounts




ACCESSION NUMBER: 201209577L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 09/28/2012
TAX TYPE: SALES