Court ruling brings back sales levy on MRI machines
-
Workers for Benkart Rigging gently maneuver a seven-ton magnetic coil for a new magnetic resonance imaging machine at Jefferson Regional Medical Center's Diagnostic Services in Bethel Park in May 2010.
Share with others:
J.P. Morgan was alleged to have been talking about yachts when he uttered his well-known financial axiom -- "If you have to ask the price, you can't afford it" -- but the same is true of MRI machines and CT scanners.
That's why local imaging clinics aren't terribly concerned about a new state Supreme Court ruling that says that MRI machines and other large imaging equipment are subject to the state's 6 percent sales tax.
By a 4-2 decision, the justices ruled that such machines are "tangible personal property," and thus subject to a sales tax to be paid by the end purchaser under the state's tax code.
The Supreme Court reversed an earlier Commonwealth Court ruling, which held that the machines, which are usually quite large, are actually a part of the building in which they are situated and thus a permanent real estate structure.
The Supreme Court, in cases known as Northeastern Pennsylvania Imaging Center vs. the Commonwealth of Pennsylvania and Medical Associates of the Lehigh Valley vs. the Commonwealth of Pennsylvania, said otherwise.
"In the end, these machines are nothing more than cameras -- they may be big, bulky and complex, but they are just devices that take pictures -- the evolution, if you will, of the X-ray machine," wrote Justice J. Michael Eakin for the majority in the consolidated appeal.
The devices can weigh five tons or more and can cost millions of dollars apiece -- meaning, under the Supreme Court ruling, they are also subject to tens of thousands, or even hundreds of thousands, in sales tax.
But clinics that have millions to drop on that type of equipment won't be driven out of the market by a sales tax, said Prashant Gosai, vice president of Pittsburgh-area Advanced Imaging Inc.
"The price of the equipment is so high to begin with, I don't think the tax is going to be a decision point," he said. "If the tax is what's scaring you, you shouldn't be buying the equipment anyway."
Non-profit hospitals -- and virtually all of the hospitals in Western Pennsylvania carry such a designation -- don't have to worry about this court decision, either, because non-profits are sales-tax exempt.
Still, the case was of interest to some for-profit outpatient clinics that trade exclusively in imaging, primarily because of the inconsistency in Pennsylvania on the tax issue over the last decade. In July 2004, the state Department of Revenue issued a ruling saying large imaging machines were not subject to sales tax, because they were permanent parts of the real estate and thus part of the construction cost of the building.
First Published February 10, 2012 12:00 am
