Tax Exemption for Hospitals: Texas Orthopedic Appliances & Devices Exemption

In the state of Texas orthopedic devices and appliances are considered to be exempt from Texas sales and use tax based on the definition of the term “orthopedic appliance” from Rule 3.284 , which interprets Texas Tax Code Sec. 151.313. As a result of the Zimmer court ruling in 2012 and the subsequent Texas Policy Letter Ruling #201304668L dated April 1, 2013 the TX Comptroller’s office provided guidance about the types of purchases that would qualify based on the Court’s ruling.

Our firm has filed refunds for a number of Texas hospitals and surgery centers based on this landmark ruling. In the 2012-2015 window of time the Texas Comptroller’s Office was honoring the exemption based on the Court’s guidance. From our experience beginning in 2016, Texas Comptroller’s Office has again taken a more limiting interpretation of these purchases. For example, we’ve had arthroscopes denied from refund claims because the Texas Comptroller’s Office has taken the position that those are merely to enable the surgeons to see into the joint to conduct repairs and that the arthroscope itself therefore is not an orthopedic device. Another example is that tools and instruments for rotator cuff surgeries have been deemed to not be exempt as orthopedic devices because those surgeries are not on the skeletal structure of the human body.

We believe that these examples are inconsistent with the intent of the language provided in the statutes. Agile Consulting Group has filed appeals for these and other denied items and are awaiting dates and times for redetermination hearings.

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