News
Can Sales Tax on Eligible HSA or FSA Items Be Reimbursed?
🤔 Did you know that your purchase AND sales tax can be covered by your HSA or FSA for qualified expenses? Maximize your savings with these sales tax tips.
February 4, 2025
Nate Matherson
Head of Growth at Numeral
Overview
Overview
Overview
You probably know that you can use your HSA and FSA to pay for common healthcare expenses. You may even be aware that these funds can be used for products or services such as fitness trackers, air purifiers, and even a massage, among a host of other items.
But, did you know that if you are charged sales tax on any HSA or FSA-eligible items, you can also pay that tax using pre-tax funds?
This can provide significant savings, especially in locations with high sales tax rates or if you are buying expensive items. Don’t let your savings go to waste, read on to learn how to get reimbursed for sales tax on FSA and HSA-eligible items.
What Qualifies as an HSA-Eligible Expense?
HSAs are available to individuals with eligible high-deductible health plans, while FSAs are offered through employers. Both allow for the payment of qualifying medical expenses with pre-tax dollars, and even a variety of expenses that may qualify if you obtain a letter of medical necessity (LOMN).
It's important to make sure an item you're buying is eligible, which you can check in the IRS publication 502.
Does Sales Tax on HSA-Eligible Items Count as a Qualified Expense?
Sales tax is considered an HSA and FSA-eligible or reimbursable expense under IRS rules.
Sales tax is included as a reimbursable expense because it adds to the amount of money you pay out to get an important health or personal care item. For example, in Pennsylvania, the retail sale of medical equipment is subject to tax unless it qualifies as an exempt therapeutic or prosthetic device.
Since the purpose of HSAs and FSAs is to make it easier to afford products you need to take care of your health — and since those products are often purchased at retail stores where they are taxed — it just makes good sense to allow you to get reimbursed not just for the thing you buy but also for taxes on the item as well.
To find out if sales tax is reimbursable on a particular item, you should check the IRS lists in Publication 502. If the item is on the list and you're taxed on it, you can get reimbursed from your HSA or FSA funds.
The only time this reimbursement wouldn't be available when buying an FSA or HSA-eligible item is if the company you purchased it from incorrectly classified it.
How to Seek Reimbursement for Sales Tax on HSA Items
The easiest way to make sure your medical purchases (and the tax on the purchases), are paid for by HSA or FSA funds is to pay for those items directly using an HSA or FSA card. If you simply pay for the eligible items with cards your HSA or FSA provider gives you, then you don't need to submit a request for reimbursement and wait for your money to come back.
This isn't always possible, though. If you make a purchase using your own funds, you'll need to submit it to your FSA or HSA provider for reimbursement using their approved process. Usually, this involves saving the receipt for the item you buy, uploading a copy of the receipt to an app or website, and submitting a claim for reimbursement.
If you want to get reimbursed for sales tax on your HSA items, make certain the receipt you submit includes the sales tax. The invoice for your purchase should be itemized so it's clear what eligible items you purchased and what tax you were charged.
Ideally, to keep things simple and to make sure you get full reimbursement for eligible items including sales tax, you should try to avoid buying eligible and ineligible items in the same transaction to minimize confusion.
Other exemptions
Some items are exempt from sales tax. This means that the merchant doesn’t need to collect sales tax on them in the first place, and you don't need to seek reimbursement. While the rules vary by jurisdiction, it's common for exempt items to include "essential" or necessary goods like food, medicine, and clothing. Services, like legal or accounting services, may also be exempt.
Outside of these broad exemptions, individuals and companies that buy items to sell to other businesses also shouldn't be charged sales tax. In these situations, however, they may need to provide an exemption certificate to prove they are a qualifying reseller.
Conclusion and Final Tips
Paying more sales tax than necessary isn't a smart move for your finances.
If you buy FSA or HSA-eligible items and you are charged sales tax on the items, be sure to submit a receipt with the tax listed for reimbursement. Paying the tax with pre-tax funds can offer considerable savings.
You probably know that you can use your HSA and FSA to pay for common healthcare expenses. You may even be aware that these funds can be used for products or services such as fitness trackers, air purifiers, and even a massage, among a host of other items.
But, did you know that if you are charged sales tax on any HSA or FSA-eligible items, you can also pay that tax using pre-tax funds?
This can provide significant savings, especially in locations with high sales tax rates or if you are buying expensive items. Don’t let your savings go to waste, read on to learn how to get reimbursed for sales tax on FSA and HSA-eligible items.
What Qualifies as an HSA-Eligible Expense?
HSAs are available to individuals with eligible high-deductible health plans, while FSAs are offered through employers. Both allow for the payment of qualifying medical expenses with pre-tax dollars, and even a variety of expenses that may qualify if you obtain a letter of medical necessity (LOMN).
It's important to make sure an item you're buying is eligible, which you can check in the IRS publication 502.
Does Sales Tax on HSA-Eligible Items Count as a Qualified Expense?
Sales tax is considered an HSA and FSA-eligible or reimbursable expense under IRS rules.
Sales tax is included as a reimbursable expense because it adds to the amount of money you pay out to get an important health or personal care item. For example, in Pennsylvania, the retail sale of medical equipment is subject to tax unless it qualifies as an exempt therapeutic or prosthetic device.
Since the purpose of HSAs and FSAs is to make it easier to afford products you need to take care of your health — and since those products are often purchased at retail stores where they are taxed — it just makes good sense to allow you to get reimbursed not just for the thing you buy but also for taxes on the item as well.
To find out if sales tax is reimbursable on a particular item, you should check the IRS lists in Publication 502. If the item is on the list and you're taxed on it, you can get reimbursed from your HSA or FSA funds.
The only time this reimbursement wouldn't be available when buying an FSA or HSA-eligible item is if the company you purchased it from incorrectly classified it.
How to Seek Reimbursement for Sales Tax on HSA Items
The easiest way to make sure your medical purchases (and the tax on the purchases), are paid for by HSA or FSA funds is to pay for those items directly using an HSA or FSA card. If you simply pay for the eligible items with cards your HSA or FSA provider gives you, then you don't need to submit a request for reimbursement and wait for your money to come back.
This isn't always possible, though. If you make a purchase using your own funds, you'll need to submit it to your FSA or HSA provider for reimbursement using their approved process. Usually, this involves saving the receipt for the item you buy, uploading a copy of the receipt to an app or website, and submitting a claim for reimbursement.
If you want to get reimbursed for sales tax on your HSA items, make certain the receipt you submit includes the sales tax. The invoice for your purchase should be itemized so it's clear what eligible items you purchased and what tax you were charged.
Ideally, to keep things simple and to make sure you get full reimbursement for eligible items including sales tax, you should try to avoid buying eligible and ineligible items in the same transaction to minimize confusion.
Other exemptions
Some items are exempt from sales tax. This means that the merchant doesn’t need to collect sales tax on them in the first place, and you don't need to seek reimbursement. While the rules vary by jurisdiction, it's common for exempt items to include "essential" or necessary goods like food, medicine, and clothing. Services, like legal or accounting services, may also be exempt.
Outside of these broad exemptions, individuals and companies that buy items to sell to other businesses also shouldn't be charged sales tax. In these situations, however, they may need to provide an exemption certificate to prove they are a qualifying reseller.
Conclusion and Final Tips
Paying more sales tax than necessary isn't a smart move for your finances.
If you buy FSA or HSA-eligible items and you are charged sales tax on the items, be sure to submit a receipt with the tax listed for reimbursement. Paying the tax with pre-tax funds can offer considerable savings.
Flex is the easiest way for direct to consumer brands and retailers to accept HSA/FSA for their products. From fitness and nutrition, to sleep and mental health, Flex takes a holistic view of healthcare and enables consumers to use their pre-tax money to do the same.