When did a specialty-bed provider have to collect Florida sales tax on prescribed hospital-bed sales and rentals to hospitals or patients?

Plain-English summary

The provider generally had to collect Florida sales tax when selling or leasing specialty hospital beds to a hospital, unless the hospital supplied the proper exemption or resale documentation.

A hospital with a valid consumer's certificate of exemption could buy or lease the beds tax-free. Merely being a section 501(c)(3) organization was not enough without the Florida certificate.

A resale certificate could apply when the hospital separately itemized and marked up the bed charge to a specific patient, the bed was prescribed for that patient by a licensed physician, it was brought in for that patient and removed when no longer prescribed, and the hospital provided the certificate when obtaining the bed.

If those conditions were not met, the provider had to tax the hospital transaction. A direct sale or rental to a patient for use at home was exempt when supported by an individual prescription.

What this means for you

The ruling distinguished the hospital's own taxable use of medical equipment from a documented resale or release to a particular patient. Prescription, patient specificity, invoicing, delivery, removal, and certificate timing all mattered.

Common questions

Q: Was every hospital's purchase exempt? A: No. The hospital needed a valid Florida consumer's certificate of exemption.

Q: Could the hospital give a resale certificate? A: Yes, when the specialty bed and patient-billing arrangement met all the conditions described in the ruling.

Q: Did a physician's prescription alone exempt the provider's lease to the hospital? A: No. The certificate and resale facts also mattered.

Q: Was a direct prescribed rental to a patient at home exempt? A: Yes under the stated facts.

Citations and references

• Fla. Stat. § 212.08(2) — medical exemptions
• Fla. Admin. Code rr. 12A-1.001, 12A-1.020, 12A-1.038 — exempt organizations, medical supplies, and resale
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-038

Original ruling text

Aug 18, 1995

Re: TAA 95A-038
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 dated August 9, 1995, regarding the issue described below. Your letter has been assigned to me for response.

FACTS

As ascertained from your letter, documents, and our telephone conversations, the following conclusions of fact have been made by the Department. XXXX was previously known as XXXX ("Taxpayer"). Taxpayer develops, manufactures, rents and sells specialized hospital beds including, but not limited to, such items as the XXXX, the XXXX, the XXXX and other similar products (collectively, "specialty hospital beds or specialty beds"). The specialty hospital beds are sophisticated pieces of medical equipment intended for use by elderly patients and patients with a variety of medical problems, including severe burns, multiple pressure sores and decubitus ulcers.

The Taxpayer leases the specialty hospital beds at a per diem rate for use by patients in hospitals and skilled nursing facilities (collectively, "the Hospital") in Florida pursuant to physicians' prescription. The physician prescriptions are documented by written order placed in the patient's hospital records. These specialty beds are distinguishable from the regular hospital beds furnished by the Hospital, to the extent that these specialty beds provide highly specific medical treatment, particularly suited for the individualized needs of a patient, and are ordered pursuant to a prescription from a duly

licensed physician.

When Taxpayer receives an order for a specialty bed which has been prescribed by a patient's physician, Taxpayer will arrange for the bed to be brought into the patient's hospital room. Taxpayer will also have the responsibility of cleaning and removing the bed, once it is no longer needed for that patient.

When Taxpayer sells or leases the specialty beds to the Hospital, Taxpayer charges the hospital for the bed. In turn, the Hospital will separately state and itemize a marked-up charge to the patients.

ISSUE

Whether Taxpayer (the specialty bed provider) is required to collect sales tax from the Hospital on the sale or lease of specialty beds which are ordered for the use of a patient, as instructed by a prescription from a duly licensed physician?

ANSWER

Taxpayer should collect sales tax from the Hospital on the lease of the specialty beds, unless the Hospital provides Taxpayer with a certificate of exemption. Alternatively, if the Hospital will be billing the patient a marked-up charge for leasing the specialty bed, the Taxpayer should not charge the Hospital sales tax, if the Hospital extends a certificate of resale at the time the Hospital leases these specialty beds, provided the beds are ordered for a specific patient, pursuant to a prescription from a duly licensed physician. Blanket resale certificates and consumers certificates of exemption may be provided in accordance with the Rules of the Department.

DISCUSSION

Exemption Certificate

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. 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 specialty 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 specialty beds.

Resale Certificates and Medical Supplies Pursuant to Prescription

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; hypodermic needles; hypodermic syringes; chemical compounds and test kits used for the diagnosis or treatment of human disease, illness, or injury;... 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, when the medical supplies are used in connection with medical treatment, unless the products are specifically exempt.

At the present time, there exists no specific exemption for the sale of hospital beds. However, because these specialty beds: 1) are distinguishable from the hospital beds which are regularly used by the hospital to provide routine medical care, 2) provide highly specific medical treatment, particularly suited for the individualized needs of a patient, 3) are brought into the Hospital for a particular patient and removed from the Hospital once the specialty hospital bed is no longer prescribed for the patient, and 4) are ordered pursuant to a prescription from a duly licensed physician, the provisions of Rule 12A1.020(1)(a), F.A.C., could operate to exempt the resale or release of the specialty bed from the Hospital to the patient, provided that: 1) the specialty bed is separately itemized and stated on the patient's invoice; 2) the specialty bed has been specifically prescribed for the exclusive use of a particular patient by a duly licensed physician; 3) the specialty bed is brought into the Hospital for a particular patient and removed from the Hospital after the specialty bed is no longer prescribed for such patient; and 4) the Hospital extends to Taxpayer a resale certificate, in accordance with Rule 12A1.038, F.A.C., at the time the Hospital leases or purchases the specialty bed.

If all of the above stated elements describing the specialty bed, and describing the resale or release from the Hospital to the patient are not incorporated into the lease transaction between the Taxpayer and the hospital, sales tax is due on the sale or lease of the specialty beds to the hospital, as provided in Rule 12A-1.020(6)(b), F.A.C.

In addition, if the Taxpayer sells or leases a specialty 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 specialty hospital bed is exempt from

sales and use tax, pursuant to Section 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,

Tracy L. Allen
Assistant General Counsel