Publication 45, Hospitals and Other Medical Facilities
Specific Hospital and Other Medical Facility Departments and Programs

Laboratories (including X-ray, electrocardiology, and others)

Application of tax to laboratory charges

Hospital laboratory charges are generally for professional services and are not subject to tax. However, charges related to cosmetic procedures may be subject to tax, as explained below.

Cosmetic procedures. You are considered a retailer and must report and pay tax on charges for photographs and X-ray films related to "cosmetic" procedures, which include any surgery to improve a patient's appearance by plastic restoration, removal of blemishes, and so on. You should separately state the prices for taxable products from nontaxable products on your billings.

Application of tax to laboratory purchases

Hospital laboratories are generally consumers of tangible personal property used in their operations. As consumers, they will generally pay sales tax reimbursement to their suppliers for their purchases of such property. However, tax does not apply to purchases of:

Exempt Medicines. Only those testing products that are administered in the living body (in vivo) qualify as exempt medicines, such as radiopaques, opaques and dyes, or glucose tolerance test substances. Testing products that are applied outside the living body (in vitro) and in an artificial environment do not qualify as exempt medicines, such as clinitest tablets, acetest tablets, and litmus paper.

X-ray film used for cosmetic procedures (see "cosmetic procedures" above). You may issue a resale certificate to your supplier for X-ray film that will be used for cosmetic procedures. In these transactions, the patient is regarded as the consumer of the X-ray film, and you must pay tax on your sale of the film to the patient.

Optical Departments

Typically, in a hospital operating an optical department, a registered dispensing optician fills prescriptions prepared by physicians, surgeons, or optometrists. In these situations, the hospital is the consumer of ophthalmic materials, including eyeglasses, frames, lenses, or their replacement parts. A hospital is also the consumer of lenses and frames furnished as duplications or replacements of parts of eyeglasses or contact lenses which were previously prescribed by a physician, surgeon, or optometrist. As the consumer, the hospital will generally pay tax reimbursement to their vendor when they purchase these items (if not, the hospital is liable for use tax on the purchase).

Please note: Sales of nonprescription eyewear (such as noncorrective sunglasses or noncorrective colored contact lenses) are taxable. In these instances, the hospital is the retailer of ophthalmic materials and tax applies to their sale. Sales of such lenses are taxable, whether sold by a pharmacist, physician, optometrist, or optician. The hospital may issue a resale certificate to its vendor for these purchases. For more information, see Resale Certificates.

Pharmacies

Tax does not apply to purchases by a pharmacy, or sales by a pharmacy, of exempt medicines, as described in the previous section. The exempt status of medicines is not affected if it is dispensed to inpatients or outpatients.

If a hospital pharmacy distributes items that do not qualify as medicines to hospital wards for staff use (other than items directly administered to the patients), the pharmacy will owe use tax based on their purchase price for those items if the pharmacy purchased the items for resale or from an out-of-state supplier who did not collect California sales or use tax. Use tax is paid by reporting the purchase price on the sales and use tax return.

Replacement contact lenses. Tax does not apply to pharmacists' sales of replacement contact lenses if they are dispensed under a prescription prepared by a physician, surgeon, or optometrist. Similar to optometrists and dispensing opticians, pharmacists who fill replacement contact lens prescriptions prepared by a physician, surgeon, or optometrist are considered the consumer of the lenses. As the consumer, pharmacists must pay tax on their purchases of lenses when they buy them.

Please note: Sales of nonprescription lenses are taxable whether they are sold by a pharmacist, physician, optometrist, or optician.

Gift shop. If your pharmacy also operates a gift shop, please see Gift Shops, Bookstores, and Newsstands for guidelines regarding the application of tax to those sales. Please see publication 73, Your California Seller's Permit, and publication 27, Drug Stores, for more information on such sales.

Blood Centers/Banks

Section 33 of the Revenue and Taxation Code provides that sales of human blood and blood plasma are exempt from taxation. Tax does not apply to the sale or use of any container used to collect or store human whole blood, plasma, blood products, or blood derivatives that are exempt from taxation according to section 33, including but not limited to blood collection units and blood pack units.

Blood pack units generally consist of a plastic bag or bags, disposable tubing, and a needle. Blood collection units may include a needle, multiple bags, a bag of saline solution, tubing, filters, grommets, a plastic bowl containing a stainless-steel centrifuge, and a pooling bag. Sales of these blood collection and pack units are not taxable even if the tubing, needles, filters, and so on are discarded and not sold together with the blood.

Visiting Nurse Programs

If your hospital has a visiting nurse program (when personnel provides services to patients at their homes), your sales of medicines under that program are generally nontaxable, since the medicines are considered to be furnished by a "health facility," as defined in Regulation 1591(a)(4)(B), Medicines and Medical Devices. If the patient is provided with an itemized bill, the hospital is the retailer of any supply item used on or provided to the patient, and tax applies to those items not specifically exempted as provided for in other sections of this publication.

Revision June 2026