Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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B

135.0000 BANKS AND INSURANCE COMPANIES—Regulation 1567

Annotation 135.0272

135.0272 Nonprofit Hospital Service Corporations. A nonprofit health service provider believes that it is a nonprofit hospital service corporation. It is regulated by the Department of Insurance, collects premiums, pays claims and is allowed by the Internal Revenue Service to deduct "claims reserves" on its federal
income tax returns. As such, it believes that it is exempt from use tax under Insurance Code section 11493.5. The provider does not believe that it is an insurance company. The provider is not an insurer which files tax returns with the Insurance Commissioner or pays a gross premium tax.

The courts have held that section 11493.5 only exempts hospital service corporations from a property tax on their funds. (Hospital Service of California v. City of Oakland (1972) 25 Cal.App.3d 402.) It does not exempt these corporations from excise taxes such as the use tax. By purchasing tangible personal property for use in this state and using it here, the health service provider has subjected itself to the use tax. 8/29/90.