The information in this publication applies only to medical clinics and similar businesses, not to nonprofit hospitals or hospices.
The sale or rental of tangible personal property and the sale of services to a freestanding nonprofit hospice facility that operates a hospice program are exempt from sales tax.
Nonprofit Hospital Exemption
Sales to nonprofit hospitals are exempt from tax.
Prescription drugs are defined as medication, oxygen, or insulin intended to be dispensed to an ultimate user pursuant to a prescription drug order or medication order from a practitioner. This means that any drug requiring a prescription is exempt upon a doctor’s order, whether or not there is actually a prescription; for example, drugs administered in an emergency situation. "Doctors" include, but are not limited to, dentists, optometrists, chiropractors, podiatrists, osteopaths, and advanced registered nurse practitioners, as well as medical doctors.
Also included within the meaning of prescription drug is any drug or medication dispensed under a prescription, even if there is no requirement for a prescription. For example, a doctor writes a prescription detailing dosage and intervals for 200 mg tablets of ibuprofen. If a pharmacist fills and labels the order, it is exempt from sales tax. If the pharmacist instructs a person to choose ibuprofen sold "over the counter," it is a taxable sale.
In order for prescription drugs or medical devices to be exempt from sales or use tax, the sale or rental must be to an ultimate user. An "ultimate user" is an individual who has lawfully obtained and possesses a prescription drug or medical device. An ultimate user cannot be a corporation or partnership. The drug or device must be prescribed, dispensed, or administered for placement on or into the body of the ultimate user to be exempt.
For example, a wheelchair prescribed for human use and sold by a medical supply store to an individual is exempt from tax. A sale of a wheelchair to a medical clinic for its own use is subject to tax because the clinic is not the ultimate user. The ultimate user must be an individual.
Prescription Not Required
The following is a non-exclusive list of items exempt from sales tax with or without a prescription, when dispensed for human use:
Durable Medical Equipment
Sales or rental of durable medical equipment prescribed for human use are exempt from sales tax.
"Durable medical equipment" means equipment, including repair and replacement parts, to which all of the following apply:
- Can withstand repeated use
- Is primarily and customarily used to serve a medical purpose
- Generally is not useful to a person in the absence of illness or injury
- Is not worn in or on the body
- Is for home use only
- Is prescribed by a practitioner
Mobility Enhancing Equipment
Sales or rental of mobility enhancing equipment prescribed for human use are exempt from sales tax.
"Mobility enhancing equipment" means equipment, including repair and replacement parts, to which all of the following apply:
- Is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle
- Is not generally used by persons with normal mobility
- Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.
- Is prescribed by a practitioner
"Prosthetic device" means a replacement, corrective, or supportive device including repair and replacement parts worn on or in the body to do any of the following:
- Artificially replace a missing portion of the body
- Prevent or correct physical deformity or malfunction
- Support a weak or deformed portion of the body
The term "prosthetic device" includes, but is not limited to, orthopedic or orthotic devices, ostomy equipment, urological equipment, tracheostomy equipment, and intraocular lenses.
The following is a nonexclusive list of exempt prosthetic devices. They are exempt with or without a prescription.
Orthotic and Orthopedic Devices
An "orthotic device" is defined as a piece of special equipment designed to straighten a deformed or distorted part of the human body, such as corrective shoes or braces. An orthotic device is an orthopedic device.
An "orthopedic device" is a piece of special equipment designed to correct deformities or to preserve and restore the function of the human skeletal system, its articulations and associated structures. A hot tub or spa is not an orthopedic device.
Following is a nonexclusive list of orthotic / orthopedic devices exempt from tax.
Sales or rental of devices which are used exclusively in conjunction with prosthetic, orthotic, or orthopedic devices are exempt from tax.
Sales or rental of power devices especially designed to operate prosthetic, orthotic, or orthopedic devices are exempt from tax. This exemption does not include batteries which can be used to operate a number of devices, but batteries designed solely for use in hearing aids are exempt.
Purchases and Sales for Resale
Medical clinics and similar businesses may make rentals or purchases tax-free for resale to patients if the following circumstances are met:
- the drug, device, or other property is actually transferred to the patient;
- the drug, device, or property is transferred in a form or quantity capable of a fixed or definite price value;
- the medical clinic and the patient intend the transfer to be a sale; and
- the sale is separately itemized on the patient’s bill.
For example, a medical clinic may not purchase surgical knives and blades for resale because the patient does not take possession of them, and there is no intent by either the medical clinic or the patient for a sale to occur. On the other hand, a medical clinic may purchase a box of tissues for resale if all four conditions listed above are met.
Medical Equipment and Supplies
Not all medical equipment and supplies are exempt from sales tax.
Following is a nonexclusive list of items that are medical devices or medical supplies. Their sales are taxable.