Yes, sales tax is eligible for reimbursement with a Flexible Spending Account (FSA) or Health Savings Account (HSA) when it is incurred on eligible medical products or services.
Why Is Sales Tax FSA/HSA Eligible?
When you purchase a qualified medical product or service using your FSA or HSA, any sales tax charged on that eligible item is also considered a reimbursable medical expense under IRS Code Section 213(d). This includes state and local taxes applied to prescriptions, medical devices, over-the-counter medications, and eligible healthcare services.
IRS Publication 502 confirms that amounts paid for medical care include charges related to the cost of the item, such as sales tax and shipping or delivery fees, if they are directly associated with the eligible expense.
Eligible examples include:
Sales tax on prescription medications
Sales tax on FSA-eligible OTC items like cold medicine, pain relievers, or bandages
Sales tax on durable medical equipment like crutches or blood pressure monitors
- Sales tax on eligible services like therapy or physical exams
What’s Not Covered?
The following are not eligible:
Sales tax on ineligible items, such as cosmetic products, general hygiene products, or non-medical supplements
Sales tax on services not tied to a medical diagnosis or treatment
Sales tax incurred on items purchased without sufficient documentation or proof of eligibility
In short: if the item or service itself isn’t FSA/HSA eligible, the sales tax won’t be either.
How to Use Your FSA or HSA for Sales Tax
If you use your FSA or HSA card at the time of purchase, the sales tax is automatically included in your transaction. If you pay out of pocket and seek reimbursement:
Keep itemized receipts showing the product/service cost and sales tax
Ensure the item itself is eligible for reimbursement
Submit both the cost and tax amount to your plan administrator
For more details, refer to IRS Publication 502.
