Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
300.0000 HOSPITALS, INSTITUTIONS AND HOMES FOR THE CARE OF PERSONS—Regulation 1503
300.0134 Supplies—Sold or Consumed. Hospitals are primarily service providers who consume tangible personal property used in rendering their services. However, hospitals may also be regarded as selling certain tangible personal property where the hospital makes a separate charge for the property and title or possession of the property passes to the patient. (Regulation 1503(b)(2).)
If a hospital makes a lump-sum charge for its services, it is regarded as the consumer of all property consumed in rendering those services, even if some of the property is transferred to the patient incidental to the hospital's services. The hospital is also always the consumer with respect to property for which title does not pass to the patient, such as reusable items and disposable gloves, regardless of the manner of billing. Thus, even if a hospital makes a separate charge for a dozen disposable gloves worn by hospital personnel during an operation, the hospital is not regarded as selling the gloves to the patient but instead is the consumer of them.
The manner of billing is relevant, however, with respect to property title to which passes to the patient. When a hospital makes a separate charge for such an item, the hospital is regarded as selling that item to the patient. If the item is not "administered" within the meaning of subdivision (b)(2) of Regulation 1503, and the hospital itemizes a charge for that item, the hospital is regarded as the seller of it. Nonadministered items, title to which passes to the patient include tissues, guest trays, pills (sales of which may be exempt as medicines), and items the patient takes upon release from the hospital.
When title to an item is transferred to the patient and the item is administered within the meaning of Regulation 1503(b)(2), the question is whether an itemized charge referring to the item is a separate charge for the item. If an item is administered, the hospital is not regarded as making a separate charge for the item unless it bills an amount for the item itself and then makes a separate charge that is specifically for the administration of that item. If instead the hospital bills an amount for the item without an additional separately itemized charge for administration of that item, the hospital is not regarded as the seller thereof even if title passes to the patient upon administration. 12/27/95. (Am. 2003–3).
(Note: Changes to Regulation 1503, effective June 1, 2001, replaced the "administered vs. nonadministered" concept with the new procedures specified in subdivision (b)(2).)