Pa. court rules MRI, PET/CT systems are taxable property

The Supreme Court of Pennsylvania has reversed a lower court decision and held that installed MRI and PET/CT systems at Northeastern Pennsylvania Imaging Center should be treated as personal property for sales tax purposes.

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 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 the property can be disassociated from realty without injury to the property.

“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 in the decision. “While their size makes them cumbersome, size does not make them part of the building.”

Because the imaging equipment and systems were removable and replaceable, they retained their identity as personal property. Therefore, the imaging center was responsible for sales tax on the equipment, according to the decision.