When were sales or leases of specialty hospital beds exempt from Florida sales tax?

Plain-English summary

Florida treated specialty hospital beds differently depending on who used the bed and how the transaction was documented.

A hospital's purchase or lease for its own use was taxable unless the hospital gave the seller a Florida Consumer's Certificate of Exemption. Merely being a section 501(c)(3) organization was not enough without that certificate.

The Department allowed resale treatment when the hospital obtained a specially prescribed bed for release to one patient, but only if the bed differed from routine hospital beds, was prescribed exclusively for that patient, entered the hospital because of the prescription, was separately itemized on the patient's bill, and the hospital gave the company a resale certificate.

A direct sale or lease to a patient for use outside the hospital was exempt when supported by that patient's prescription from a licensed physician.

What this means for you

• A hospital's exempt status had to be documented with the Department-issued certificate.
• Patient-specific use did not automatically create resale treatment; all five conditions and the resale certificate mattered.
• Direct home-patient transactions depended on an individual prescription.

Common questions

Q: Was every sale or lease of a specialty hospital bed exempt? A: No.

Q: Did a hospital's 501(c)(3) status alone make its own bed purchases exempt? A: No. The hospital had to extend its Consumer's Certificate of Exemption.

Q: Could a bed obtained by a hospital for a specific patient qualify as a resale? A: Yes, if the transaction met all five conditions listed in the ruling and the hospital supplied a resale certificate.

Q: Was a prescribed bed leased directly to a home patient exempt? A: Yes, on the stated facts.

Citations and references

• Fla. Stat. § 212.02(16) — leases included in sales
• Fla. Stat. § 212.07(1)(b) — resale compliance
• Fla. Stat. § 212.08(2) — medical-product exemptions
• Fla. Admin. Code r. 12A-1.001(3)(a) — exempt organizations
• Fla. Admin. Code r. 12A-1.020(6) — medical products and prescriptions
• Fla. Admin. Code rr. 12A-1.038, 12A-1.039 — resale certificates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-020

Original ruling text

Mar 14, 1996

VIA FAX AND US MAIL

Re: TAA 96A-020
Sales Tax - Taxation of "Specialty" Hospital Beds s. 212.08(2), F.S. Rules 12A-1.001, and 12A-1.020, F.A.C.

Dear :

Your letter of June 22, 1994, supplemented by letters dated January 31, 1995, and December 15, 1995, requested a Technical Assistance Advisement on the application of the sales tax to the above referenced matter. This response to your request constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the authority of s. 213.22, Florida Statutes (F.S.).

The parties to this request are: 1) XXX, 2) XXX, 3) XXX, 4) XXX, 5) XXX, and 6) XXX (collectively referred to as "Company" or "Companies").

FACTS

As ascertained from your letters, and the documents submitted and incorporated by reference in your request, the Department's understanding of the facts is as follows.

The Companies sell or lease specialized air support therapy beds and related products ("specialty beds"), which are designed to prevent or relieve certain illnesses, such as, skin ulceration or bed sores caused by long-term bed care, breathing and orthopedic problems, which may cause necrosis of bone and damage to muscles and bones.

According to your letters these products are used by and in hospitals, and under the care of registered nurses for home patients. These specialty beds are primarily leased, although

some are sold, to acute care facilities, such as hospitals, convalescent hospitals and skilled nursing facilities ("the Hospital(s)"). The lease of these beds is, generally, pursuant to a prescription from a licensed physician, for a specific patient, while the patient is receiving medical treatment at a Hospital. With the exception of sales (as opposed to leases) directly to Hospitals, all transactions are under a doctor's prescription.

As per pages 1-2 of your letter, dated January 31, 1995, the issue of concern, and the reason for this request is stated as follows:

The controversy arises in the context of a [specialty] bed leased to a patient in a hospital. In that case, as in the individual case, the physician orders (prescribes) that the patient use a specific type of bed overlay for a specified purpose and therefore subject to a particular treatment regimen as indicated. In order to enable the patient to fulfill that prescription, the hospital then leases the specific product to the taxpayer. The hospital obtains the product from [Company] by lease. A substantial service is provided by [Company's] personnel under the doctor's direction in connection with the use of the product by the patient. The hospital separately charges and bills the patient for that specific product. The lease price to the patient is not governed by any agreement of the hospital with [Company]"

TAXPAYER'S POSITION/RULING REQUESTED

It is the Company's position that the products sold or leased by Company should be exempt from sales and use tax on the basis that they are medical products used in the cure, mitigation, alleviation, prevention or treatment of injury, illness, disease, or incapacity, ordered and dispensed by or on the prescription of a duly licensed practitioner, authorized by the laws of Florida to prescribe medicinal drugs, within the meaning of Rule 12A-1.020, F.A.C. Additionally, Company asserts that the transaction(s) between the Hospital and the patient is

a sublease; and, that a lease from Company to the Hospital is a lease for sublease under an individual prescription. Thus, such transactions should be exempt from Florida sales tax, either as: 1) a sale for resale (Rule 12A-1.038, F.A.C.); or 2) as a medical product for the use of a patient, pursuant to a prescription by a licensed physician (Rule 12A-1.020(6)(a)2., F.A.C.).

STATUTORY AND REGULATORY PROVISIONS

The following provisions from the Florida Statutes and the Florida Administrative Code are pertinent to the issues raised in your letters.

Section 212.02(16), F.S., defines "sale" to include the lease of tangible personal property.

Section 212.07(1)(b), F.S., provides the following:

A resale must be in strict compliance with the rules and regulations, and any dealer who makes a sale for resale which is not in strict compliance with the rules and regulations shall himself be liable for and pay the tax.

Section 212.08(2), F.S., provides, in pertinent part, as follows:

(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 the tax imposed by this chapter... prosthetic and orthopedic appliances;...

Rule 12A-1.001(3)(a), F.A.C., provides, in pertinent part:

A sale or lease directly to... nonprofit charitable

institutions,... for use in the course of their customary... activities,... [is] 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....

Rule 12A-1.020, F.A.C., regarding drugs, medicine and medical products and supplies, provides, in pertinent part, as follows:

(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)(a) Medical products and supplies used in the cure, mitigation, alleviation, prevention or treatment of injury, illness, disease or incapacity are taxable, unless:

"2. Ordered and dispensed by or on the prescription of a

duly licensed practitioner authorized by the laws of the state to prescribe medicinal drugs;...

(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 under this rule or in Rule 12A-1.021, F.A.C. (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.

Rule 12A-1.038, F.A.C., provides:

(1) It is the specific legislative intent that each and every sale, admission, use, storage, consumption or rental is taxable... unless... specifically exempt. The exempt status must be established by the dealer. Unless the dealer shall have taken from the purchaser a certificate to the effect that the property or service was purchased for resale... the sale shall be deemed to be a taxable sale at retail.

"(3) A resale certificate is required from every purchaser who purchases tangible personal property or service for resale,.... Otherwise the dealer will be required to collect and remit the tax to the Department of Revenue...."

ISSUE

Whether tax is due on the sale or lease of the specialty hospital beds to Hospital(s).

DISCUSSION

A. THE SALE OF THE SPECIALTY BEDS FOR THE HOSPITAL'S OWN USE

1. Consumer's Certificate of Exemption

Rule 12A-1.001(3)(a), F.A.C., provides that a qualifying charitable organization may make certain purchases exempt from the payment of sales tax, provided the organization has obtained a Consumer's Certificate of Exemption from the Department. Therefore, if the Hospital extends to the Company a Consumer's Certificate of Exemption at the time of the purchase or lease, the transaction would be exempt.

2. No Consumer's Certificate of Exemption

If the Hospital does not have a Consumer's Certificate of Exemption from the Department of Revenue, which the Hospital extends to the Company 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 tax on the purchase or lease of the specialty beds.

B. THE SALE OR LEASE OF SPECIALTY BEDS PURSUANT TO PRESCRIPTION

1. The Release of Specialty Bed by Hospital to Patient

Rule 12A-1.038(1), F.A.C., provides that it is the specific Legislative intent that each and every sale or lease is taxable unless specifically exempt. Therefore, if the Company, does not take from the Hospital, a Blanket Resale and Exemption Certificate, at the time of lease to the effect that the specialty bed is being leased by the Hospital for release to a patient, then the lease of the specialty bed would be taxable, and the Company will be required to collect the sales tax from the Hospital and remit the tax to the Department.

The Department will allow resale treatment for the sale or lease by Company to a Hospital of a specialty bed like those described in your request provided: 1) the specialty bed is distinguishable from the regular hospital beds normally used by the Hospital to provide routine medical care; 2) the specialty

bed has been specifically prescribed for the exclusive use of a particular patient by a licensed physician; 3) the specialty bed is brought into the Hospital pursuant to the prescription; 4) the charge for the specialty bed is separately itemized on the patient's invoice; and 5) the Hospital extends to the Company a resale certificate, in accordance with Rules 12A-1.038 and 12A1.039, F.A.C.

2. Sale or Lease of Specialty Bed Directly to The Patient

Rule 12A-1.020(6)(a), F.A.C., provides that medical products and supplies, such as the specialty beds, are exempt when ordered and dispensed by a licensed physician. Therefore, if the Company sells or leases a specialty bed directly to a patient for the patient's use outside the Hospital, pursuant to an individual prescription issued by a duly licensed physician which is furnished by the patient to Company, the sale or lease of the specialty bed is exempt from sales tax pursuant to Rule 12A-1.020, F.A.C.

CONCLUSION

The Company's sale of specialty beds to a Hospital for its own use is subject to tax, unless the Hospital issues Company its Consumer's Certificate of Exemption. The Company's sale or lease of specialty beds for release by the Hospital to a patient is not taxable if the transaction meets the requirements set out immediately above in paragraph B.1. The Company's sale or lease of specialty beds directly to a patient for the patient's use outside the Hospital will be exempt, as provided in Rule 12A1.020(6)(a), F.A.C., if the specialty bed was prescribed for the patient by a duly licensed physician.

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
Tax Law Specialist

Control No. 16339