Texas Offers Guidance on Partial Exemption for LLCs with Medical Purpose

In Texas, a limited liability company (LLC) may claim a partial exemption from Texas sales and use tax on its purchase of taxable items much like a joint venture or partnership. To qualify for the exemption, the LLC must have a medical purpose.

Partial exemptions on purchases of taxable items may be granted to an LLC if:

• one or more of its members qualifies for an exemption from sales and use tax under Section 151.310 (Religious, Educational, and Public Service Organizations);
• the LLC has a medical purpose;
• the LLC operates similarly to a joint venture;
• the LLC files as a partnership for federal income tax purposes; and
• the items purchased relate to the tax-exempt purpose of the exempt member

The amount for the partial exemption will equal the percentage of the LLC that is owned by an exempt member or members of the LLC. The tax exemption amount claimed by the LLC is capped and cannot exceed the amount of charity care or government-sponsored indigent health care provided by the LLC. Eligible LLCs that did not claim a sales tax exemption on their qualifying purchases may file a claim for refund for all open periods within the statute of limitations. (Letter No. 201707003L, (Jul. 7, 2017))