Do you use Teflon tape on hydraulic hose threads?

Use PASTE aka pipe dope. Any Teflon tape that is introduced into a hydraulic system can cause all kinds of problems. Tape can cause valves to not seat properly, allowing leakage, or bypass. Pumps can get damaged from tape also. Play it safe and use paste, if it does enter the hydraulic system, it will pass through the components and then get captured by the filter.