Rules & Regulations of the State of Tennessee
Title 1320 - Revenue
Subtitle 1320-05 - Sales and Use Tax Division
Chapter 1320-05-01 - State Sales and Use Tax Rules
Section 1320-05-01-.26 - HOSPITALS AND SANITARIUMS

(1) Hospitals and sanitariums are primarily engaged in the business of rendering services and are the consumers or users of all tangible personal property or taxable services purchased for use or consumption in connection with the operation of the institution. The sellers of tangible personal property, other than prescription drugs or mobility enhancing equipment prescribed for patients or prosthetic devices, or taxable services to these institutions must collect from them the appropriate tax, but this provision does not apply to a hospital or sanitarium which is otherwise exempt from paying the sales and use tax by virtue of its being a charitable or other like institution.

(2) If a hospital or sanitarium operates any division that sells tangible personal property or taxable services, such as a lunch room, repair shop, or similar department, then the hospital or sanitarium is liable for the tax upon the gross receipts or gross proceeds derived from such sales.