Is a hyperbaric oxygen chamber exempt from Texas sales tax when it is rented to a for-profit hospital?

Subject

Hyperbaric Oxygen Chamber (HOC) — Therapeutic Device Exempt To Patients Under Prescription, But Taxable When Rented To A For-Profit Hospital

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9311L1272D13

Plain-English Summary

The taxpayer asked the Comptroller how sales tax applies to a hyperbaric oxygen chamber (HOC) that is rented to a for-profit hospital. A hyperbaric oxygen chamber is a device used therapeutically — the letter's title describes it as being placed over wounds to prevent infection and assist in the healing process.

The Comptroller's answer draws a distinction based on who is doing the renting:

• A hyperbaric oxygen chamber qualifies as a therapeutic device under Rule 3.284(a)(11) and (c)(7) when it is rented to an individual under a doctor's prescription. In that scenario, the rental is exempt.
• But when the unit is sold, leased, or rented to a for-profit hospital, it is taxable. The Comptroller's reasoning is that the hospital is using the unit to provide medical care to its patients — the hospital, not the patient, is the party renting the unit. This is true even though the hospital may in turn charge the patient for use of the device; that downstream charge to the patient doesn't change who the taxable rental is actually made to.

In short, the exemption follows the direct doctor's-prescription rental to an individual patient, not a rental where a for-profit hospital is the customer and simply passes the cost through to the patient.

What This Means For You

If you rent a hyperbaric oxygen chamber (or similar therapeutic device) directly to a patient under a doctor's prescription: That rental can qualify as exempt under Rule 3.284(a)(11) and (c)(7).

If you sell, lease, or rent a hyperbaric oxygen chamber to a for-profit hospital: That transaction is taxable, regardless of the fact that the hospital's own patients are the ones ultimately being treated with — and billed for — the device. The hospital is the taxable purchaser/lessee in that chain, not the patient.

If you are a for-profit hospital acquiring an HOC unit: Expect the vendor to charge sales tax on the sale, lease, or rental, since this letter treats the hospital as using the device to provide medical care rather than as merely passing along an exempt rental to the patient.

Caution: This letter is explicitly fact-specific — it states "[t]his opinion is based on the facts presented. Different facts, though similar, may result in different answers." It does not address non-profit hospitals, sales/rentals to physicians' offices, or any other variation on these facts.

Q&A

Q: Is a hyperbaric oxygen chamber ever exempt from Texas sales tax?
A: Yes — according to this letter, it qualifies as a therapeutic device under Rule 3.284(a)(11) and (c)(7) when it is rented to an individual under a doctor's prescription.

Q: If a for-profit hospital rents an HOC unit and then charges the patient for using it, is that rental exempt?
A: No. The letter says the unit is taxable when sold, leased, or rented to a for-profit hospital, because the hospital is using it to provide medical care — the hospital, not the patient, is the one renting the unit, even though the patient is charged for it.

Q: Does this letter distinguish between for-profit and non-profit hospitals?
A: The letter only addresses a rental to a "for-profit hospital." It does not discuss non-profit hospitals, so no conclusion about that scenario can be drawn from this text.

Q: Why does it matter who is considered the "renter" of the device?
A: Because the exemption in this letter is tied to a direct rental to an individual patient under a doctor's prescription. When a for-profit hospital is the party contracting for the unit — even if it later bills the patient — the Comptroller treated the hospital, not the patient, as the taxable party in the transaction.

Original ruling text

November 30, 1993

Dear *****:

Thank you for your letter dated November 17, 1993, regarding sales tax as it
applies to a hyperbaric oxygen chamber that is rented to a for-profit hospital.

A hyperbaric oxygen chamber is a therapeutic device as defined in Rule
3.284(a)(11) and (c)(7) when rented to an individual under a doctor's
prescription.

The unit is taxable when sold, leased, or rented to a for-profit hospital. The
hospital uses the unit to provide medical care; the hospital is not renting the
unit to the patient even though the patient is charged for the unit.

This opinion is based on the facts presented. Different facts, though similar,
may result in different answers. If you have any questions or need more
information, please write or call me at 1-800-531-5441, extension 50330, or
512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9311176L