Could a third-party copying service exclude a separately labeled statutory medical-record fee when the hospital made its records available without charging the service?

Plain-English summary

Audit Evaluation and Planning asked whether an Evidence Code charge was always exempt when passed through separately, regardless of who billed it, and whether a copying service acting as the subpoenaed record holder's agent could bill the requester directly. The question followed a February 17, 1984 Staff Counsel letter and the last four paragraphs of Regulation 1528(a)(2).

Counsel explained that an April 26, 1984 opinion considered a hospital that did not copy or bill for records. The hospital merely sent the subpoena or authorization to a copying service, made records available, and the service copied, delivered, and billed the requester.

Under those facts, every amount billed by the copying service was taxable. Because the hospital made no authorized Evidence Code charge to the service, the service could not create a nontaxable statutory fee merely by separately labeling part of its own bill that way.

The original incoming facts reportedly said the hospital might or might not charge its copying service. The April response assumed no hospital charge, and the attorney did not reply. That conclusion later became the regulation's last-paragraph rule. The memorandum left open a different result if the hospital actually imposed a valid Evidence Code charge on its service and directed future audits raising that branch into the opinion-writing or petition process.

Live annotation and source posture

The current live annotation accurately states the no-charge branch and all-charges-taxable conclusion. It presents the hospital's free access as a fact, while the supporting memorandum says the 1984 incoming facts allowed that the hospital may or may not charge and Counsel assumed no charge after receiving no response. The live page omits both 1984 opinions, the November 4 internal questions, the agency-billing question, how the rule entered Regulation 1528(a)(2), the unresolved valid-charge branch, and the instruction to use an opinion or petition if an audit presented different facts.

The PDF supplies neither the November 4 memorandum nor the February 17 and April 26 opinions it says were attached. It also supplies no hospital, copying-service, attorney or requester identity; subpoena or authorization; medical record; charge authorization; hospital-to-service bill; service-to-requester bill; separate fee statement; agency agreement; audit workpaper; petition; dollar amount; assessment; refund; or final taxpayer outcome. The holding is therefore conditional on the expressly assumed no-hospital-charge facts.

CDTFA's Annotated Legal Opinions collection says the source letters and memoranda are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official two-page PDF has a native text layer and no embedded raster image, so no OCR was required. Both fresh direct PDF downloads and both live-page downloads were byte-identical; duplicate default PDF extractions matched despite the file's nonfatal configuration warning, and the original-text section remains byte-identical to its committed version and the fresh extraction after removal of only the extractor's terminal newline and form feed.

What this means for you

Identify who is legally authorized to impose the statutory fee, who actually makes the charge, and whether the copying service is passing through a real charge or creating its own label. Under this memorandum, separately stating statutory fee did not exempt the copying service's charge when the hospital charged it nothing.

Common questions

Q: Was every separately stated Evidence Code fee nontaxable?

A: No. Counsel rejected that broad interpretation under the regulation's last-paragraph rule.

Q: Why were all copying-service charges taxable in the stated scenario?

A: The hospital was assumed to make the records available without imposing any authorized charge on the service, so none of the service's bill was a pass-through of a hospital charge.

Q: What if the hospital charged the copying service a valid statutory fee?

A: Counsel said the result might change and directed such audit facts to the opinion-writing or petition process. The memorandum did not decide that branch.

Q: Did the source prove an actual hospital charged nothing?

A: No. It reports that the earlier incoming facts allowed both possibilities, says Counsel assumed no charge, and notes that the attorney did not respond.

Citations and references

• California Evidence Code sections 1158 and 1563 — statutory charges discussed but not reproduced
• California Sales and Use Tax Regulation 1528(a)(2), last four paragraphs — interpreted in the memorandum
• February 17 and April 26, 1984 Board opinion letters to the copying service's attorney — described as attached but absent
• November 4, 1988 Audit Evaluation and Planning memorandum — quoted and answered but absent
• Subpoena, authorization, hospital and service invoices, agency evidence, audit, petition, assessment and outcome records — implicated but absent

Verbatim support

From the official November 30, 1988 internal memorandum:

You state your opinion that a statutory fee pursuant to Evidence Code Sections 1158 or 1563 is always exempt from tax.

The incoming facts, as stated by Mr. S---, were that the hospital may or may not impose a charge on its copying service for making its records available.

In our response, we stated our belief that in such a factual situation the hospital would not make any charge to its copying service, and if the hospital makes no charge, then the copying service can make no nontaxable statutory charge, regardless of how such charge is stated to the requesting party.

Granted, the result may change if a hospital did made a valid Evidence Code charge to its own copying service.

If any of our audits turn up facts which call the last paragraph of Regulation 1528(a)(2) into question, we should work them out through the opinion writing or petition process.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0325
• Original supporting opinion: 420.0325 PDF

Original ruling text

State of California

Memorandum

To:

Audit Evaluation and Planning (BDR)

From:

Donald J. Hennessy

Subject:

Regulation 1528(a)(2) – Statutory Evidence Code Charges

Board of Equalization

420.0325

November 30, 1988

Your November 4, 1988 memorandum to me concerns the last four paragraphs (6th through 9th paragraphs) of Regulation 1528(a)(2). You attached a copy of my February 17, 1984 letter, on the same subject, to Mr. A. T--- S---, Attorney for C--- Systems, SR -XX XXXXXX. You state your opinion that a statutory fee pursuant to Evidence Code Sections 1158 or 1563 is always exempt from tax. That is, if the fee is passed on as a separate charge it is exempt, regardless of who bills it. As an example, you state that if a copying service bills a requestor for copies, any separately stated statutory fee previously billed to it by a subpoenaed party is exempt from tax. You ask if this is a correct interpretation. Additionally, you ask whether the subpoenaed party has to invoice the statutory fee in order for the fee to be exempt, or may a copying service acting as the agent of the subpoenaed party invoice the requestor directly, with the statutory fee remaining exempt. You then pointed out that the last paragraph of Regulation 1528(a)(2) indicates that some such billings by a copying service are taxable, but the reasoning for this conclusion is unclear to you. In explanation of the last paragraph of Regulation 1528(a)(2) which is unclear to you, I am attaching a copy of my April 26, 1984 opinion letter, also to C--- Systems Attorney, A. T--S---. My April 26, 1984 letter responds to a factual situation in which the hospital (hereinafter “hospital” includes other persons or entities holding the sought-after records) does not provide the copies, nor does the hospital bill for the copies. Rather, the hospital merely sends the subpoena or authorization letter to a copying service and makes its records available to the copying service; the copying service then performs the copying, delivers the copies to the requesting party, and bills the requesting party. Given such facts, our opinion was that tax applied to all charges by the hospital’s copying service to the requesting party. We concluded that none of the charges by the copying service were a mere passing on of the charges the hospital was authorized to make under the Evidence Code. The incoming facts, as stated by Mr. S---, were that the hospital may or may not impose a charge on its copying service for making its records available. In our response, we stated our belief that in such a factual situation

Audit Evaluation and Planning

-2-

November 30, 1988
420.0325

the hospital would not make any charge to its copying service, and if the hospital makes no charge, then the copying service can make no nontaxable statutory charge, regardless of how such charge is stated to the requesting party. Not hearing further from Mr. S---, the conclusion in our April 26, 1984 letter eventually became the rule stated in the last paragraph of Regulation 1528(a)(2). Granted, the result may change if a hospital did made a valid Evidence Code charge to its own copying service. If any of our audits turn up facts which call the last paragraph of Regulation 1528(a)(2) into question, we should work them out through the opinion writing or petition process. Therefore, the interpretation in your November 4, 1988 memorandum is subject to the rule stated in the last paragraph of Regulation 1528(a)(2), which should be considered in the context of our April 26, 1984 opinion. As to your question on whether who bills the fee can change the result, again, see our opinion of April 26, 1984.

DJH:jb

420.0325.doc