Is a database-access 'interface' to medical records and lab results taxable in Kansas?

Plain-English summary

A taxpayer bought "interfaces" — a web-based test-ordering and results-reporting system that lets a laboratory's physician and hospital clients access patient lab test results over the internet — and argued the purchases were a non-enumerated, nontaxable service. The Department agreed: the interface is not taxable.

Kansas does not tax an "information" service or "database access service" — that is, a collection of records or data stored in a remote computer system, with software that lets the purchaser access the system electronically to answer queries or extract information (Kansas Department of Revenue Information Guide EDU-71R). Because the interface offers exactly that kind of database access to medical records and test results, it is not subject to Kansas sales tax.

What this means for you

Providers and buyers of data-access platforms

A service whose real substance is electronic access to a database of records — to run queries or pull information — is generally a nontaxable information/database-access service in Kansas, not an enumerated taxable service.

Healthcare and lab IT vendors

Systems that give clinicians internet access to patient records and lab results can fall on the nontaxable side under the EDU-71R database-access analysis. The classification turns on the substance of the service, so document how the platform functions.

Common questions

Q: Is a database-access or information service taxable in Kansas?
A: No. Kansas does not tax a service consisting of electronic access to a remote collection of records or data used to answer queries or extract information.

Q: What guidance did the Department rely on?
A: Its Information Guide EDU-71R, which describes nontaxable "information" and "database access" services.

Q: Does it matter that the records are medical/lab data?
A: The exemption turns on the nature of the service (database access), not the subject matter; here the medical-records interface qualified.

Q: Does this ruling apply to me?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows how the Department reasons.

Citations and references

• Kansas Department of Revenue Information Guide EDU-71R — Kansas does not tax an "information" service or "database access service" consisting of a collection of records or data stored in a remote computer system that the purchaser accesses electronically to answer queries or extract desired information. The Department applied this to find the medical-records/test-result interface nontaxable.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2015-003

Original ruling text

Private Letter Ruling

Body:

September 28, 2015

Dear XXXXXXX,

This letter is in response to your letter whereby XXXXXXX contends that their purchases of “interfaces” qualify as a non-enumerated service, and that the interface suppliers provide XXXXX’s clients with access to a collection of records or data in order to retrieve information and are therefore not taxable.

Kansas does not tax an “information” service or “database access service” that consists of a collection of records or data that is stored in a remote computer system and contains software that allows the purchaser of the service to access the system electronically to answer queries or extract desired information. (Kansas Dept. of Revenue Information Guide No. EDU-71R)

In your letter, you state:

“Generally, the Data Exchange provides a web-based test ordering and results reporting system that enables physicians and hospital clients of a separate laboratory to access patient laboratory test results via the internet in a secure and reliable way”

It is our determination that your “interface” system which offers database access to medical records and test result is not taxable.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

Sincerely,

Mark D. Ciardullo

Tax Specialist

Date Composed: 09/29/2015 Date Modified: 09/29/2015

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