25 Feb Texas Sales Tax Medical Exemption for Hospitals Includes Many Categories of Purchases
In addition to the Texas sales tax medical exemption for orthopedic devices and appliances provided in the Zimmer ruling, there are several other categories of exemptions available to Texas hospitals and healthcare providers. Texas Tax Code Ann. § 151.313 provides a sales and use tax exemption for the following items:
- Prescription drugs or medicines
- Hypodermic syringes or needles
- Braces used on the human body to correct a physical ailment or defect
- Prosthetic devices
- Hospital beds and related parts
- Wound care dressings
- Blood glucose monitoring test strips
- IV systems and related supplies
For most of these items, the definitions in Texas Admin. Code §3.284 have not changed since 2004. Prosthetic devices are defined as, “an item that is artificial and replaces a missing part of the body, performs the function of a vital organ or appendage of the human body, or that is permanently implanted in the body.” Some examples of prosthetic devices are heart-lung pumps, ventilators, gastrointestinal devices, and urethral stents. Wound care dressings are defined as, “an item that absorbs wound drainage, protects healing tissue, maintains a moist or dry wound environment (as appropriate), or prevents bacterial contamination.” Bandages, gauze, hemostats, and nasal packing strips are some types of items that would meet the definition of a wound care dressing.
There was a significant change to the definition of intravenous systems that occurred in 2013. Effective Sept. 1, 2013, House Bill 3169 altered the definition of an IV system to any product “designed or intended to be used to administer fluids, electrolytes, blood and blood products, or drugs to patients or to withdraw blood or fluids from patients, regardless of whether the product is designed or intended to be inserted subcutaneously into any part of the body.” Prior to this change, intravenous systems and supplies only qualified for the Texas sales and use tax exemption if they were administered subcutaneously, which means they had be used for injection below the skin. With this change, some items that now qualify as exempt are angiographic catheters, anesthesia infusion catheters, contrast media injection tubing, fluid drainage catheters, and infusion pumps.
There has also been a recent change to the sales and use tax exemption related to radiation emitting equipment repairs and maintenance. In 2012, Texas Ruling #201209577L stated that the repair, remodeling, maintenance, or restoration of diagnostic imaging or therapeutic equipment subject to oversight under the Radiation Control Program administered by the Texas Department of State Health Services qualified for the sales and use tax exemption found under Texas Tax Code Ann. § 151.338. Types of radiation equipment that were determined to be exempt in this ruling were computed tomography (“CT”), x-ray radiographic and/or fluoroscopic (“XR” and “XF”), cardiac catheterization and similar vascular (“XV”), mammography (“MM”), bone densitometers, gamma camera and other nuclear medicine (“NM”). This exemption also applied to component parts of an integrated unit of qualifying diagnostic imaging or therapeutic equipment, including x-ray tubes, filters, detectors, power supplies, operator’s workstations, viewing equipment, printers, patient tables, networking equipment, and associated computer software.
On June 28, 2018, Ruling #201209577L was superseded by Texas Ruling # 201806001L, which limited the exemption to only separately stated labor charges to repair diagnostic and therapeutic equipment that emit radiation. Therefore, any component or integrated part that is attached or connected to this equipment that does not emit radiation itself will not qualify for a Texas sales and use tax exemption.
From our experience working with hospitals and health care providers in Texas, we’ve found that vendors like Cardinal Health, Medline and Owens & Minor are charging sales tax on IV systems and supplies, wound care dressings, and hypodermic syringes and needles that would qualify for a Texas sales and use tax exemption. In order to claim the exemption on future qualifying purchases from their vendors, Texas hospitals and healthcare providers need to supply their vendors with a properly completed Texas Certificate of Exemption (Form 01-339). If sales tax has already been paid, collected, and remitted on the purchase of any of these qualifying health care supplies in Texas, the purchaser can apply for a refund from the Texas Comptroller of Public Accounts, provided they do so within the 48-month statute of limitations for which the TX Comptroller allows refunds to be filed.
As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Texas sales and use tax exemptions. If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at email@example.com.