Items bought by free hospitals

A hospital that charges its patients nothing for health care pays no Washington sales or use tax on items reasonably necessary to run the hospital and provide that care. The test is about the hospital, not the item: nonprofit status or charity care alone does not qualify a hospital that bills patients.

Who qualifies

• A "free hospital": a hospital that does not charge patients for health care provided by the hospital (RCW 82.08.02795(2)).

What qualifies

• Items reasonably necessary for the operation of, and provision of health care by, the free hospital.
• The statute does not limit the exemption to medical items or list exclusions; the measure is whether the item is reasonably necessary for the hospital's operation and care.
• The matching use tax exemption is RCW 82.12.02745.

Not covered

• Purchases by hospitals that charge patients for health care.
• Items not reasonably necessary for the free hospital's operation or care.

What the buyer gives

Form REV 27 0055, Sales Tax Exemption Certificate for Health Care Providers (revision 7/23/24), line 15, "Certain items purchased by free hospitals which are reasonably necessary for the operation of health care provided by the free hospital." The buyer ticks single use or blanket (valid while buyer and seller have at least one sale within 12 months), names the seller and the date, ticks the line for the exemption, and completes the signature block: type of entity, name of buyer, name of business, Account ID if any, signature, date, mailing address, title and phone. Only practitioners who can legally prescribe under Washington law may use the form; the form names chiropractors, East Asian medicine practitioners and massage practitioners as unable to use it.

What the seller keeps

Form REV 27 0055 says the seller or marketplace facilitator "must retain the original of this certificate for their records" and not send a copy to the Department of Revenue. WAC 458-20-18801(304): sellers to medical practitioners, nursing homes and hospitals must obtain an approved exemption form, capture the streamlined sales tax data elements, or otherwise meet RCW 82.08.050(7) for any exempt sale. If the buyer is not a hospital that provides care free of charge, the line 15 exemption does not apply. RCW 82.32.070(1) requires taxpayers to "keep and preserve, for a period of five years, suitable records as may be necessary to determine the amount of any tax for which the taxpayer may be liable." Under RCW 82.08.050(4) a seller is not relieved of the tax unless it keeps proper records of exempt sales and provides them when the department asks; (7)(a) relieves a seller that obtains a fully completed certificate within 90 days after the sale, and (7)(b) allows 120 days after a department request to prove the sale was not taxable or obtain a fully completed certificate taken in good faith.

Common mistakes

• A nonprofit or charity-care hospital claiming line 15. The hospital must not charge patients for its health care.
• Using line 15 for items unrelated to running the hospital or providing care.
• Citing RCW 82.12.02795 for use tax. The free hospital use tax exemption is RCW 82.12.02745.

Common questions

Does a nonprofit hospital qualify for the free hospital sales tax exemption?

Only if it charges patients nothing for the health care it provides. The statute defines a free hospital by that fact, not by nonprofit status.

Are a free hospital's office and maintenance purchases exempt?

The statute covers items "reasonably necessary for the operation of" the free hospital, without listing exclusions. If you are unsure whether an item qualifies, request a ruling from DOR.

Sources

• RCW 82.08.02795 (1)-(2)
• RCW 82.12.02745 (1)-(2)
• WAC 458-20-18801 (304); (403)(a)
• DOR form REV 27 0055 (7/23/24), Sales Tax Exemption Certificate for Health Care Providers Line 15; page 3 instructions, line 15
• RCW 82.08.050 (4), (7)(a)-(c) seller records and certificate timing
• RCW 82.32.070 (1) five-year record retention