Did Illinois tax fees for electronic or hardcopy medical-record copies?

Plain-English summary

An office asked whether a company or medical provider should charge tax for supplying copies of medical records.

IDOR distinguished electronic delivery from hardcopy. Viewing, downloading, or electronically transmitting video, text, or other data over the internet was not a transfer of tangible personal property. A service that supplied medical records only electronically therefore did not transfer property for these rules.

Hardcopy records were different. When a service provider delivered paper records, tangible personal property accompanied the service. IDOR said that generally created Service Occupation Tax or Use Tax liability, calculated under one of four methods: the separately stated selling price of the property, 50% of the entire bill, Service Occupation Tax on cost for a registered de minimis serviceman, or Use Tax on cost for a qualifying unregistered de minimis serviceman.

What this means for you

Delivery format controlled the key distinction in this GIL. An emailed or downloaded record was not tangible property; a paper copy was. The letter did not reduce the hardcopy analysis to a single universal billing percentage because the applicable method depended on the provider's activities and registration status.

Common questions

Were electronically sent medical records tangible personal property? No.

Could paper copies create tax liability? Yes.

Did IDOR say providers must always tax the full hardcopy invoice? No. It described four possible calculation methods.

Citations and references

• 86 Ill. Adm. Code 140.101.
• Section 2a of the Illinois Retailers' Occupation Tax Act.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0104-gil.pdf

Original ruling text

ST 15-0104 (GIL) October 15, 2015 SERVICE OCCUPATION TAX

Under the Service Occupation Tax, servicemen are taxed on tangible personal property
transferred incident to a sale of service. See 86 Ill. Adm. Code Part 140. (This is a GIL.)

October 15, 2015

Dear XXxXxx:

This letter is in response to your letter dated September 3, 2015, in which you request
information. | The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only to
the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to
Department regulations or other sources of information regarding the topic about which they
have inquired. A GIL is not a statement of Department policy and is not binding on the
Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant
to your inquiry.

The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:

Our office is seeking a letter from the Illinois Department of Revenue on whether a
company or medical provider should be charging sales taxes for providing copies of medical
records. Our office believes that providing copies of medical records is a service and not a sale
of goods, and therefore there should be no collection or payment of sales taxes. Please advise
our office on the correct procedure for this so that we can inform medical records providers of
the law on this matter.

If you should have any questions, please feel free to contact the undersigned.

DEPARTMENT?’S RESPONSE:

Retailers' Occupation and Use Taxes do not apply to sales of service. Under the Service
Occupation Tax Act, businesses providing services (i.e., servicemen) are taxed on the tangible
personal property transferred as an incident to sales of service. See 86 Ill. Adm. Code 140.101.
The purchase of tangible personal property that is transferred to the service customer may result

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in either Service Occupation Tax liability or Use Tax liability for the servicemen depending upon
his activities.

The serviceman’s liability may be calculated in one of four ways:

(1) separately stated selling price of tangible personal property transferred incident to
service;

(2) 50% of the serviceman's entire bill;

(3) Service Occupation Tax on the serviceman's cost price of tangible personal
property transferred incident to service if the serviceman is a registered de
minimis serviceman; or

(4) Use Tax on the serviceman's cost price of tangible personal property transferred
incident to service if the serviceman is de minimis and is not otherwise required to
be registered under Section 2a of the Retailers' Occupation Tax Act.

Note, the Department does not consider the viewing, downloading or electronically
transmitting of video, text and other data over the internet to be the transfer of tangible personal
property. However, if a company provides services that are accompanied with the transfer of
tangible personal property (e.g., medical records delivered to a customer in a hardcopy version,
rather than sent electronically), such service transactions are generally subject to tax liability
under one of the four methods set forth above.

I hope this information is helpful. If you require additional information, please visit our
website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at
(217) 782-3336.

Very truly yours,

Debra M. Boggess
Associate Counsel

DMB:mdb

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