Are a company's medical-records services — coding, abstraction, and secure online storage — subject to Colorado sales or use tax?
Plain-English summary
A company that handles medical records for clients asked two things: (1) Has the Department changed the position it took in the company's earlier private letter ruling, PLR 13-005, about providing medical records to third parties? And (2) are a list of related services taxable? Those services were:
- Coding — turning narrative descriptions of diseases, injuries, and procedures into numeric/alphanumeric codes so records can be accessed by diagnosis and procedure.
- Abstraction — pulling key information from handwritten and typed reports and entering it into an electronic medical record.
- Access to records in an online database — secure, online storage the customer reaches with a username and password, installing no software and storing no data on its own server.
The Department's answer is short and consistent: it is not aware of any change in law that would change the conclusion in its August 21, 2013 letter (PLR 13-005). And as long as the Department keeps treating retrieving and copying medical records as a service rather than a sale of tangible personal property, none of the listed items is taxable — because there is no sale of tangible personal property.
The common thread is Colorado's basic rule: it taxes sales of tangible personal property and only a few enumerated services. Coding and abstraction are pure information-handling services; the online database is hosted access the customer reaches without taking possession of any software or hardware. Nothing tangible changes hands, so nothing is taxed.
What this means for you
Medical-records and health-IT companies
Services that process, code, abstract, or host medical records generally fall outside Colorado sales/use tax, because you're not selling tangible personal property. The line to watch is whether a transaction shifts to delivering tangible goods (for example, selling physical copies in a way the Department would treat as a TPP sale) — but pure records services, and online access where the customer installs nothing and stores nothing locally, read as non-taxable services here.
Healthcare providers buying these services
You generally shouldn't expect Colorado sales tax on coding, abstraction, or secure online records storage from a vendor — they're services. As always, confirm with your vendor and watch the home-rule-city caveat.
Accountants and tax professionals
This GIL reaffirms PLR 13-005 and rests entirely on the service-vs-TPP line: no tangible personal property is sold, so no tax. The online-database piece tracks the Department's broader treatment of hosted/ASP arrangements where the customer installs no software and keeps no data locally. Note the GIL hedge — it's expressly tied to the Department "continuing to take the view" that records retrieval/copying is a service.
Common questions
Q: Is medical-records coding or abstraction taxable in Colorado?
A: No. They're information-handling services, and no tangible personal property is sold, so they're not subject to sales or use tax.
Q: Is paying for secure online storage of patient records taxable?
A: As described here — the customer logs in with a username/password, installs no software, and stores no data on its own server — it's treated as a non-taxable service.
Q: Did the Department change its earlier ruling (PLR 13-005)?
A: No. It said it's not aware of any change in law that would alter the conclusion in its August 21, 2013 letter.
Q: When could records work become taxable?
A: The conclusion is premised on the Department continuing to treat retrieving and copying records as a service. A transaction that amounted to a sale of tangible personal property could be analyzed differently.
Q: Can I rely on this letter?
A: No. A General Information Letter is general guidance and is not binding on the Department; it makes no determination on any specific facts. It also doesn't cover self-collected home-rule city taxes. (The company's own PLR 13-005 binds the Department only as to that company.)
Citations and references
Rules:
- Department Rule 24-35-103.5 (GIL / PLR procedure)
Department guidance:
- PLR 13-005 / the Department's August 21, 2013 letter (retrieving and copying medical records is a service, not a TPP sale)
Source
- Landing page: Colorado Sales & Use Tax Letter Rulings
- Original PDF: GIL-15-009.pdf
Original ruling text
Office of Tax Policy, P.O. Box 17087, Denver, CO 80217-0087 ([email protected])
GIL-15-009 — April 16, 2015
Re: Services in Connection with Retrieving and Copying Medical Records
You submitted on behalf of the Company a request for guidance to determine the taxability of certain services associated with retrieving and copying medical records. […] The Department initially treats your request as one of a general information letter.
Issue
- Has the Department modified its position on the issues addressed in PLR 13-005?
- Are any of the services described in the Background section below subject to sales or use taxes?
Background
We previously issued to Company a private letter ruling relating to provisioning medical records to third parties. Company asks if our view on this has changed on this issue. In addition, Company lists a number of services, described below, and asks if these are subject to sales or use tax.
Coding Service. Coding is the transformation of narrative descriptions of diseases, injuries, and health care procedures into numeric or alphanumeric designations. […] Coding health-related data permits access to health records according to diagnoses and procedures for use in clinical care, research, and education.
Abstraction Service. Abstraction is the process of taking important medical information from handwritten and typed reports and physically entering that information in an electronic medical record.
Access to Records Stored in an Online Database. Company provides customers secure, online storage space in which the customer can store and access at any time patient records and other sensitive documentation. The customer uses a username and password to access the stored files. The customer does not install any software and does not store any data on the customer's own server.
Discussion
The Department is not aware of any change in law that would suggest a different conclusion from the one we issued in our August 21, 2013 letter. Moreover, so long as the Department continues taking the view that retrieving and copying medical records is a service rather than the sale of tangible personal property, none of the items listed in the Background section are subject to tax because there is no sale of tangible personal property.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable on state taxes issues. However, the Department does not make a specific determination here on any of the issues raised and the Department is not bound by this general information letter. The Department administers state and state-administered local sales and use taxes; this letter does not address sales and use taxes administered by home-rule cities and home-rule counties.
(Condensed from the official PDF; see the linked source for the complete text and footnotes.)