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You can't avoid death & taxes
by Jeffrey S. Baird & Steven D. Moore

Of the many challenges facing durable medical equipment (DME) suppliers, one of the most misunderstood pertains to the obligation to collect sales tax. When a supplier sells products only to residents of the state they are located in, the question the supplier must answer is whether such sales generate a sales tax obligation. The same question arises when the DME supplier sells products across state lines—but they must also ask whether they need a physical connection to other states before those states can require them to collect sales tax.

Sales tax issues are determined on a state-by-state basis. Product A may require sales taxes in state A, but not in state B. A DME supplier may be inclined to not take sales tax issues seriously, resulting in the supplier failing to collect the correct sales tax when the law mandates it. Such an approach is ill-advised, because it can create a scenario in which a state agency brings a collection action against the supplier for the missing sales taxes—and potentially penalties and interest.

With the prevalence of the internet, it is becoming increasingly common for DME suppliers to sell products to customers who live in other states. These providers must address whether they have the obligation to collect sales tax in those states. Until 2018, many suppliers relied on two United States Supreme Court cases—National Bellas Hess, Inc. v. Department of Revenue and Quill Corp v. North Dakota—for the proposition that unless the supplier has a physical nexus within a state (e.g., a location in the state, inventory stored in the state or employees in the state), the supplier has no obligation to collect sales tax.


In 2018, in South Dakota v. Wayfair, Inc., the United States Supreme Court overruled Bellas Hess and Quill and decided that a South Dakota statute allowing the state to impose the obligation to collect sales tax on an out-of-state seller was valid, even if the seller has no physical presence in South Dakota. The Supreme Court stated, in part:

Because the physical presence rule of Quill is unsound and incorrect, Quill … and … Bellas Hess are overruled.

[T]he Court held in Bellas Hess that a ‘seller whose only connection with customers in the State is by common carrier or … mail’ lacked the requisite minimum contacts with the State … and that unless the retailer maintained a physical presence in the State, the State lacked the power to require that retailer to collect a local tax.

The physical presence rule has long been criticized as giving out-of-state sellers an advantage. Each year, it becomes further removed from economic reality and results in significant revenue losses to the States.

When the day-to-day functions of marketing and distribution in the modern economy are considered, it becomes
evident that Quill’s physical presence rule is artificial … in its entirety. Modern e-commerce does not align analytically with a test that relies on the sort of physical presence defined in Quill.

The internet revolution has made Quill’s original error all the more egregious and harmful. The Quill Court did not have before it the present realities of the interstate marketplace, where the internet’s prevalence and power have changed the dynamics of a national economy.

Nexus After Wayfair

The minimum nexus—that is, the level of contact or activity that has to occur within a state for sales tax purposes—is either 200 transactions or $100,000 of annual sales revenue from sales of items subject to sales tax. While $100,000 or 200 transactions is the minimum nexus standard, some larger states have adopted larger nexus tests.

Examples of Taxability

Below are several common categories of DME and how various states tax these items. Review your state’s sales tax laws for more specific information.


  • Breast Pumps—Breast pumps are taxable even if sold by a licensed pharmacist with a prescription from a doctor.
  • Adult Diapers—Sales tax applies to the sale of incontinence supplies even if they are sold on a prescription basis.
  • CPAP Machines & Supplies—The sale of a CPAP under the direction of a physician is exempt from sales tax. On the other hand, devices that only assist the patient in breathing and do not directly deliver air or oxygen are subject to sales tax.


  • Breast Pumps—The authors have not found any Florida authorities expressly addressing breast pumps or supplies. Notwithstanding the lack of express authority, a review of applicable regulations suggest that breast pumps are subject to sales taxes.
  • Adult Diapers—Personal hygiene products, including diapers, briefs and protective underwear, are subject to sales tax unless dispensed according to a doctor’s prescription.
  • CPAP Machines & Supplies—There don’t appear to be any Florida authorities expressly addressing CPAP machines or supplies. However, if a CPAP is intended to be used for medical purposes to treat illness and is dispensed to a patient pursuant to a doctor’s prescription, the CPAP may be exempt from Florida’s sales tax.


  • Breast Pumps—Breast pumps are subject to Illinois sales tax and are not eligible for its 1% use tax rate.
  • Adult Diapers—Diapers for incontinent adults qualify for the 1% use tax rate.
  • CPAP Machine & Supplies—The authors haven’t found definitive rulings on CPAP devices in the state of Illinois. The closest the state will come to a ruling reads: “The items listed [including CPAP machines], may qualify for the low rate of tax [1%] if they are part of a system used in breathing by patients who have breathing disabilities.” The state does provide guidance for sales to Medicaid and Medicare patients: “Under the traditional Medicare and Medicaid plan, sales made directly to Medicare and Medicaid beneficiaries [and reimbursed directly by Medicare and Medicaid to the DME supplier] are exempt from tax as sales to a government body so long as the exemption is properly documented through provision of an active exemption identification number.”

New York

  • Breast Pumps—Breast pumps are generally exempt unless purchased for use in performing medical or similar services for compensation.
  • Adult Diapers—To the extent a nursing home buys clothing and footwear for patients (including adult diapers), such items are exempt from state sales taxes if the receipt is less than $110 per article of clothing or pair of shoes. This exemption does not apply to local sales and use tax unless the county or city in which the sale occurs elected this exemption.
  • CPAP Machine & Supplies—CPAP machines and supplies appear to be taxable in New York.


  • Breast Pumps—Breast pumps are taxable unless the purchaser has a prescription from a doctor.
  • Adult Diapers—Adult diapers are taxable unless the purchaser has a prescription from a doctor.
  • CPAP Machine & Supplies—CPAPs and BiPAPs qualify for an exemption as a therapeutic device when sold to an individual with a doctor’s prescription. Sales to doctors, for-profit hospitals, nursing homes and hospices are generally not exempt because they are not sales to individual patients, although that may not apply if the institution purchases the item for resale to its patient and provides the DME vendor with a fully completed resale certificate.

Jeffrey S. Baird, Esq., is chairman of the health care group at Brown & Fortunato, a law firm with a national health care practice based in Texas. Baird is board certified in health law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or

Steven D. Moore, Esq., is a partner in the Austin, Texas, office of Jackson Walker, a multi-office full-line law firm based in Texas. He represents companies on sales tax, franchise tax, property tax and related tax matters. He can be reached at (512) 236-2074 or