News and Insights

Pennsylvania Supreme Court Holds that Installed Medical Equipment Retains its Identity as Personal Property

Tax Development Feb 13, 2012

In Northeastern Pennsylvania Imaging Center v. Pennsylvania, the Supreme Court of Pennsylvania (“Court”) reversed a lower court decision and held that installed MRI and PET/CT scan systems should be treated as personal property for sales tax purposes. [No. 93 MAP 2009 (Pa. 2011)].

Pennsylvania law provides that a contractor owes sales tax on personal property that the contractor incorporates into real property. No tax is due on the amount the contractor charges its customer for the installed property. If, however, the personal property retains its identity as personal property, the customer owes sales tax on the property.

Northeastern Pennsylvania Imaging Center (“Northeastern”) argued that the MRI and PET/CT scan systems were furnished by and incorporated into real property by its contractor and that the contractor was responsible for the sales tax.

The Court disagreed. In finding that Northeastern was responsible for sales tax, the Court explained that property retains its identity as personal property if property can be disassociated from realty without injury to the property. Because the scan equipment and systems were removable and replaceable, they retained their identity as personal property. Therefore, Northeastern was responsible for sales tax on the equipment.


Dennis J. Kolumber, Jr.