Were sales and rentals of therapeutic specialty hospital beds to hospitals or individual patients subject to Florida sales tax?

Subject

Sale and Rental of Specialty Hospital Beds

Plain-English summary

Sales and rentals of the specialty beds to hospitals were taxable unless the hospital presented its Florida Consumer's Certificate of Exemption at the time of the transaction. A hospital's federal section 501(c)(3) status alone did not establish the Florida sales-tax exemption.

The Department treated hospital beds as taxable medical products or supplies when sold or leased to a hospital for use in treating patients. It found no specific product exemption for these transactions apart from the hospital's own qualifying exemption certificate.

By contrast, a bed sold or leased directly to an individual patient for use at the patient's residence was exempt when an authorized practitioner prescribed the bed for that patient.

What this means for you

The ruling separated facility purchases from direct prescribed home use. It also made documentation decisive: an exempt hospital needed to extend its Florida certificate when buying or leasing the bed.

Common questions

Q: Did a hospital's 501(c)(3) status alone exempt the transaction? No.

Q: Did the exemption certificate apply to both purchases and leases? Yes, if the hospital extended the certificate at the time of the sale or lease.

Q: Were direct rentals to patients exempt? Yes, when prescribed for the individual patient's use at home.

Citations and references

• Fla. Stat. § 212.08(2) — medical exemptions
• Fla. Admin. Code r. 12A-1.001(3)(a) — exempt organizations and certificates
• Fla. Admin. Code r. 12A-1.020(1)(a), (6)(b), (c) — prescriptions and medical supplies
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-048

Original ruling text

Jul 21, 1993

RE: TAA 93A-048
Sales Tax; Sale and Rental of Specialty Hospital Beds
s. 212.08(2), F.S.
Rules 12A-1.001, 12A-1.020, 12A-1.038, F.A.C.

Dear :

This acknowledges receipt of your letter to Mr. Charles
Strausser, Chief, Bureau of Technical Assistance and Training,
Department of Revenue, dated March 4, 1993, regarding the issue
described below. Your letter has been assigned to me for
response.

FACTS

As ascertained from your letter and our telephone
conversations, the following conclusions of fact have been made.
XXX (hereinafter, Taxpayer) sells and leases specialty hospital
beds which provide therapeutic benefits for acutely ill
patients.

These beds assist in preventing and treating decubitus
ulcers (i.e., bed sores), by supporting a patient on vaporpermeable and temperature-controlled air sacs in which pressure
can be regulated to distribute a patient's weight evenly;
thereby, reducing skin pressure. The sole purpose of these
specialty hospital beds is to provide therapeutic benefit for
acutely ill patients.

As per our telephone conversations, it is our understanding
that, to Taxpayer's knowledge, hospitals are not in the business
of re-leasing or selling these types of beds to patients; that
these beds are mainly leased, although some are sold, to acute
care facilities such as hospitals, convalescent hospitals and
skilled nursing facilities, for a specific patient, for use at
the hospitals, convalescent hospitals and skilled nursing
facilities; and that each bed normally has to be specially

cleaned and sanitized after each patient's use of that bed. It
is also our understanding that in some instances the hospital
beds are leased directly to patients for use in the patient's
residence. This occurs pursuant to a prescription from the
patient's physician for the rental and use of such bed.

Also in our telephone conversations, you stated that with
regard to the sale of hospital beds to the hospitals, Taxpayer
does not collect tax if the hospital extends its Consumer's
Certificate of Exemption to Taxpayer. However, when the
hospital beds are leased to the hospitals, Taxpayer does not
obtain a Consumer's Certificate of Exemption from the hospitals.
Moreover, Taxpayer uses a conglomerate billing system which does
not distinguish between the sales or leases of the hospital beds
made either to the hospitals or to the patients. No copies of
billing invoices were submitted to the Department for review.

ISSUE

"[W]hether sales tax should be collected by [Taxpayer] from its
customers on the sales and rentals of specialty hospital beds
made to `non-exempt hospitals and individuals'."

DISCUSSION

Rule 12A-1.001, F.A.C., provides, in pertinent part:

"(3)
"(a) A sale or lease directly to... nonprofit charitable
institutions,... for use in the course of their
customary... activities,... are exempt from the tax imposed
by Part I, Chapter 212, F.S.... However, such institutions
or organizations desiring to qualify for the exemption must
obtain from the Department of Revenue a consumer's
certificate of exemption, and payment must be made directly
to the dealer by the exempt entity...." (Emphasis added).

As provided in the above quoted Rule, the State of Florida
exempts qualifying charitable organizations from the payment of
sales tax, provided the organization has obtained a Consumer's
Certificate of Exemption from the Department of Revenue. Thus,

if a hospital does not have a Consumer's Certificate of
Exemption from the Department of Revenue, which the hospital
extends to Taxpayer at the time of purchase or lease of the
hospital beds, the fact that the hospital is a s. 501(c)(3),
I.R.C., organization does not exempt the hospital from payment
of Florida sales and use tax on the purchase or lease of the
hospital beds.

More specifically related to hospitals and medical
supplies, s. 212.08(2), F.S., provides, in part:

"(2) EXEMPTIONS; MEDICAL. "(a) There shall be exempt from the tax imposed by this
chapter any product, supply, or medicine dispensed in a
retail establishment by a pharmacist licensed by the state,
according to an individual prescription or prescriptions
written by a prescriber authorized by law to prescribe
medicinal drugs;... There shall also be exempt from tax
imposed by this chapter... prosthetic and orthopedic
appliances;... "

In accordance with that statutory provision the Department
has promulgated Rule 12A-1.020, F.A.C, which provides, in part:

"(1)(a) Medicines dispensed in a retail establishment by a
pharmacist licensed by the State of Florida, according to
an individual prescription or prescriptions written by a
duly licensed practitioner authorized by the laws of the
state to prescribe medicinal drugs, are exempt.
"1. Prescription' includes any order for drugs or medicinal supplies written or transmitted by any means or communication by a duly licensed practitioner authorized by the laws of the state to prescribe such drugs or medicinal supplies and intended to be dispensed by a pharmacist.... The term also includes an order written or transmitted by a practitioner licensed to practice in a jurisdiction other than this state, but only if the pharmacist called upon to dispense such order determines, in the exercise of his professional judgment, that the order is valid and necessary for the treatment of a chronic or recurrent illness. The termprescription' also includes a

pharmacist's order for a product selected from the
formulary created pursuant to s. 465.186, F.S.
Prescriptions may be retained in written form or the
pharmacist may cause it to be recorded in a data processing
system, provided that such order can be produced in printed
form upon lawful request.

"(6)
"(b) The sale of medical products or supplies to
physicians, dentists, veterinarians and hospitals is
taxable even though the medical products or supplies may be
used in connection with medical treatment, unless the
products and supplies are specifically exempt from tax....
"(c) `Medical products and supplies' shall mean and
include, but is not limited to, such items as cotton,
knives, sewing and surgical needles, scissors, microscopes,
X-ray machines, I.V. administration sets, laboratory
apparatus, surgeons' gloves, ear syringes, and hospital
beds." (Emphasis added).

Therefore, while it is true that s. 212.08(2), F.S., and
Rule 12A-1.020, F.A.C., provide an exemption for certain medical
supplies, Rule 12A-1.020(6)(b), F.A.C., specifically provides
that the sale of medical products or supplies to physicians,
dentists, veterinarians and hospitals is taxable, even though
the medical supplies are used in connection with medical
treatment, unless the products are specifically exempt.

Presently, there exists no specific exemption for the sale
or lease of hospital beds to hospitals, when such beds are used
by the hospital in providing medical treatment to its patients,
unless the hospital extends its Consumer's Certificate of
Exemption to Taxpayer at the time of sale or lease of such beds.
As a result, tax is due on the sale and lease of the hospital
beds to a hospital, in accordance with Rule 12A-1.020(6)(b),
F.A.C., unless the hospital extends to Taxpayer, at the time of
sale or lease, its Consumer's Certificate of Exemption.
However, when Taxpayer sells or leases a hospital bed directly
to a patient for use at the patient's residence, pursuant to an
individual prescription issued by a person authorized by law to
issue such prescriptions, then the sale or rental of the

hospital bed is exempt from sales and use tax, pursuant to s.
212.08(2), F.S., and Rule 12A-1.020, F.A.C.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
based on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Nydia Men‚ndez
Technical Assistant

NM/pb
Con. #7279