Authorize sales and use tax exemption for medical items, services

136th Legislature (2025-2026) Introduced by Rachel Baker and 1 co-sponsor

Ohio HB936 would exempt from Ohio sales tax eligible medical items and services purchased with FSA/HSA funds.

Referred to committee

#healthcare #healthandhumanservices #taxation

Ohio HB 936 (136th General Assembly) – Summary of Purpose and Key Provisions

Main purpose and intent

The bill amends Ohio Revised Code section 5739.02 to authorize a sales and use tax exemption for medical items and services eligible to be purchased with proceeds from flexible spending accounts (FSAs) and health savings accounts (HSAs). In short, certain medical-related purchases funded by these accounts would be exempt from Ohio sales tax.

What changes the bill would make

Repeals and rewrites current law governing the state’s sales tax framework under section 5739.02.
Establishes a five percent sales tax rate plus an additional three-fourths of one percent (the exact rate structure appears in the text) on retail sales, aligning with existing Ohio tax mechanisms, but with a targeted exemption for medically eligible items and services purchased via FSAs/HSAs.
Creates a broad list of exemptions and taxable categories, including many existing exemptions for government, nonprofit, food, fuel, utilities, construction-related sales, and various special-case scenarios.
Specifically adds (or clarifies) an exemption for “sales of eligible tangible personal property or services for medical care, as defined in section 213 of the Internal Revenue Code,” when purchased with FSA/HSA funds.
Provides the framework for administration and compliance, including the dealer obligation to collect tax at the point of sale and the state’s authority to administer the tax through its commissioner.

What would be affected

Taxpayers who use FSAs or HSAs to pay for eligible medical items and services may benefit from a state sales tax exemption on those eligible purchases.
Retail vendors and service providers would be responsible for collecting the state tax (where applicable) and applying the exemption when appropriate.
Government and public sector entities remain within the tax framework with existing exemptions; the bill clarifies exemptions and administrative rules across a broad spectrum of goods and services.

Procedural and timeline aspects

The amendment applies beginning the first day of the first month after the act’s effective date.
The bill repeals the existing section 5739.02 and substitutes a new version that governs the taxation framework, including the new exemption for medical items/services purchased with FSA/HSA funds.
It designates companion sponsors: Rep. Baker (lead) and Rep. Sigrist, with Rep. Rachel Baker as a co-sponsor.

Notable points

The core substantive impact is the addition of a targeted exemption for medical items and services paid with FSA/HSA funds, potentially reducing out-of-pocket costs for many families when purchasing eligible medical care goods and services in Ohio.
The bill maintains a comprehensive, detailed exemption structure for other goods and services, reflecting Ohio’s broad tax policy framework.

If you’d like, I can highlight the exact definitions of “medical care” as used in the bill (referencing the Internal Revenue Code provision) and map where the exemption would apply in common purchases (prescription drugs, durable medical equipment, etc.).