Are charges for medical coding, healthcare training and education, and medical-record abstraction subject to Georgia sales tax?

Plain-English summary

The healthcare company's charges for coding, training and education, and abstraction were not taxable because Georgia law did not specifically designate those services as taxable.

The company was nevertheless the final consumer of tangible personal property used to provide the services. It owed sales tax when buying that property, or use tax on the cost price if it had bought the property for resale and later withdrew it for its own service work.

Common questions

Q: Did it matter whether the services were performed onsite or at the provider's headquarters?

A: The ruling treated the described services as nontaxable without drawing a distinction based on those two performance locations.

Q: Could the service provider buy its supplies tax-free for resale?

A: Not when it consumed them in providing the services. A resale purchase later withdrawn for service work triggered use tax on cost.

Citations and references

• O.C.G.A. §§ 48-8-1, 48-8-30(a) -- sales-tax imposition
• Ga. Comp. R. & Regs. r. 560-12-1-.14(7)(d) -- service providers as consumers

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2015-10

Original ruling text

Date Issued: September 9, 2015
Georgia Letter Ruling: LR SUT-2015-10
Topic: Service Provider – Training

This letter is in response to your letter ruling request, regarding the application of Georgia sales and use tax to certain
services performed by Taxpayer.
Facts as Presented by Taxpayer
Taxpayer performs the following services for Healthcare Providers:


Coding, which involves transforming narrative descriptions of diseases, injuries, and procedures into numeric
or alphanumeric designations (“code numbers”). The code numbers describe the diagnosis and the procedures
performed to test or correct the diagnosis.



Training and education for all levels of coders, physicians, and ancillary hospital personnel, including
documentation improvement, inpatient and outpatient coding assessments and training, and revenue cycle
management.



Abstraction, which involves taking medical information from handwritten and typed reports and physically
entering it into an electronic record. Taxpayer hires nurses and other health information management
credentialed people to perform this service.

Taxpayer may perform these services onsite at the Healthcare Provider’s facility or at Taxpayer’s headquarters,
depending on the scope of services selected by the particular Healthcare Provider. Taxpayer invoices the Healthcare
Provider for these services.
Issue
Are Taxpayer’s charges for coding, training and education, and abstraction services subject to the tax?
Analysis
Georgia levies and imposes a tax (subject to certain specific exemptions) on the retail purchase, retail sale, rental,
storage, use, or consumption of tangible personal property and on certain enumerated services. 1 Unlike sales of
tangible personal property, which are generally presumed taxable, sales of services are not subject to tax unless
specifically designated as taxable. Because coding, training and education, and abstraction services are not explicitly
identified as taxable services under Georgia law, charges made for these services are not subject to the tax.
However, service providers generally must pay the tax on tangible personal property used in providing their services.
Service providers are deemed the end users and consumers of tangible personal property used or consumed during the
provision of a service if the service provider does not separately charge for such property. 2 This includes property that
loses its identity when used and consumed during the provision of services and property that is deemed to be an
inconsequential element of the service transaction.3 The service provider is liable for the tax on the purchase price of
such tangible personal property. If such property was purchased under terms of resale, the service provider must accrue
and remit use tax on the cost price of the property, because the property is deemed to be withdrawn from inventory
for the service provider's use.4

1

O.C.G.A. §§ 48-8-1, -30(a).
Ga. Comp. R. & Regs. 560-12-1-.14(7)(d).
3
Id.
4
Id.
2

Date Issued: September 9, 2015
Georgia Letter Ruling: LR SUT-2015-10
Topic: Service Provider - Training
Page 2 of 2

Ruling
Based on the facts presented, Taxpayer is performing a nontaxable service. Taxpayer’s charges for coding, training
and education, and abstraction services are not subject to the tax. However, Taxpayer must pay sales or use tax on the
purchase price of tangible personal property used to perform these services.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances, and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. Subsequent statutory
or administrative rule changes or judicial interpretations of the statutes or rules upon which this ruling is based may
subject similar future transactions to a different tax treatment than that expressed in this ruling.