006.05.06 Ark. Code R. 005-GR-37

Current through Register Vol. 49, No. 10, October, 2024

Rule 006.05.06-005-GR-37 - EXEMPTIONS FROM TAX - HOSPITALS AND SANITARIUMS

A. The gross receipts or gross proceeds derived from the sale of tangible personal property or services to any state owned and tax supported hospital or sanitarium operated for charitable and non-profit purposes are exempt from the tax.

B. The gross receipts or gross proceeds derived from the sale of tangible personal property or services to any non-profit organization whose sole purpose is to provide temporary housing to the family members of patients in a hospital or sanitarium are exempt from the tax except for the sale of materials used in the original construction, extension or repair of the temporary housing.

C. The gross receipts or gross proceeds derived from the sale of tangible personal property or services to any other hospital or sanitarium operated for charitable and non-profit purposes are exempt from the tax except the sales of materials used in the original construction, extension or repair of such a hospital or sanitarium shall not be exempt from the tax.

D. The gross receipts or gross proceeds derived from the sale of tangible personal property or services to a hospital or sanitarium operated for profit are taxable.

E. DEFINITIONS.

1. "Non-profit" means that no part of the income received by the hospital or sanitarium from any sources inures (either directly or indirectly) to the benefit of any individual, corporation organized for profit, trust organized for profit, or partnership organized for profit.

2. "Repair" means substantial modifications or substantial work upon the hospital or sanitarium building itself which are necessary because of some extraordinary occurrence such as fire, earthquake, flood, explosion, or structural failure. Repair does not include the replacement of items or work performed on the hospital or sanitarium building as a result of ordinary wear and tear, depreciation, maintenance, or vandalism. Repair does not include remodeling or refurbishing of any part of the existing hospital or sanitarium facility not necessitated by damage.

3. "Hospital" means an institution which provides medical and surgical care for the general public. Two basic factors determine whether an institution is a hospital:

a. The institution provides beds for the overnight stay of patients (an institution which provides "out-patient" services only is not a hospital); and

b. The institution provides a broad range of medical and surgical services.

4. "Sanitarium" means an institution which provides long-term in-patient medical or mental treatment for the physically or mentally ill, including a charitable, nonprofit nursing home or a charitable, non-profit hospice.

5. "State-owned, tax-supported" means owned by the State of Arkansas and supported by public funds.

6. "Charitable organization" means an organization whose purpose is benevolent, philanthropic, patriotic or eleemosynary and whose function if performed, and not performed by a private party, would have to be performed at public expense.

7. "Extension" means the exterior expansion, vertically or laterally, of the existing facility such that additional usable space is added to the total usable space of the hospital or sanitarium. The addition or expansion of parking facilities is also an "expansion".

F. Materials purchased by the hospital (except for state-owned hospitals) for repairs are subject to sales tax; however, if a contractor purchases repair materials for use in completing a contract with the hospital, the contractor must pay sales tax on all purchases. Materials purchased by a charitable, non-profit, non-state owned hospital for maintenance or routine replacement are exempt.

G. An entity that is affiliated with a hospital, but is a separate legal entity from the hospital and does not itself qualify as a "hospital" or "sanitarium," may not purchase items exempt from tax if the entity's purchases are paid by the separate entity. For example, a clinic that is a subsidiary or affiliate of a hospital, but that provides "outpatient" services only or otherwise fails to qualify as a hospital, is not exempt from tax on purchases of items paid with the subsidiary or affiliates' own funds.

006.05.06 Ark. Code R. 005-GR-37

Ark. Code Ann. § 26-52-401(21)