Are a medical-records companys retrieval, coding, abstraction, training, and storage services taxable?

Plain-English summary

A company retrieves and furnishes medical records for healthcare providers (responding to requests from patients, insurers, physicians, agencies, etc.) and also offers coding, abstraction, coder training, and online data storage. It asked which of these are taxable.

The Office of Counsel concluded most are not taxable:

• Medical-records retrieval/furnishing — not taxable. Retrieving and furnishing a patients specific confidential medical records to an authorized requester is not taxable, whether paid by the provider or the requester, and delivery charges are not taxable either; the delivery method (mail or electronic) doesnt change it.
• Abstraction — not taxable. Typing handwritten/typed records into an electronic medical record without adding any information or intelligence is not an information service (Finserv), taxable neither in tangible nor electronic form.
• Coder training/education — not taxable. Education is not an enumerated taxable service.
• Digital data storage — not taxable. Sales tax reaches only storage of tangible property, not digital products (TSB-A-05(40)S).
• Coding — usually excluded, but watch the recipient. Coding (turning narrative diagnoses/procedures into codes) is an information service because it analyzes/compiles/organizes information — but the codes are uniquely personal to the patient. So it is excluded as personal/individual when provided only to the healthcare-provider customer or an authorized requester. If the coded information is provided to third parties (e.g., for research/education), the coding charge becomes taxable (it would then be substantially incorporated into reports furnished to others).

What this means for you

Health-information and records-release companies

Releasing patients own records to authorized requesters is not a taxable information service, and digital storage of those records is not taxable. Mechanical abstraction (no added intelligence) and training are also non-taxable.

Coding turns on who receives it

Medical coding is an information service, but it stays non-taxable as personal/individual as long as the coded output goes only to the provider or an authorized requester. Sharing the coded data with third parties (research, education) flips it to taxable — because then it can be substantially incorporated into reports furnished to others.

Mere format conversion is not an information service

Converting records from paper to electronic without adding intelligence is Finserv non-taxable — a useful line for any data-entry/digitization service.

Common questions

Q: We charge to pull and send a patients medical records. Taxable?
A: No. Retrieving and furnishing a patients specific confidential records to an authorized requester is not taxable, and neither are the delivery charges, regardless of delivery method.

Q: Is our medical coding taxable?
A: Not when provided only to your healthcare-provider customer or an authorized requester (its personal/individual). It becomes taxable if the coded information is provided to third parties such as for research or education.

Q: Is digital storage of the records taxable?
A: No. Only storage of tangible personal property is taxable; storage of digital products is not.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(1) (tax on information services; personal-or-individual exclusion)
• 20 NYCRR 527.3 (information services)
• Finserv Computer Corp. v. Tully, 94 AD2d 197 (3d Dept 1984) (mere conversion adds no intelligence; not an information service)
• Matter of Allstate Ins. Co. v. Tax Commn, 115 AD2d 831 (1985) (uniquely personal information)
• TSB-A-05(40)S (storage of digital products is not taxable)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_31s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel

TSB-A-16(31)S
Sales Tax
December 2, 2016

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S141209B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED (“Petitioner”). Petitioner asks
whether its various services related to the provision of healthcare information are subject to sales and
use tax in New York. We conclude that most of these services are not taxable. However, Petitioner’s
coding service would be taxable if it is provided to someone other than its healthcare provider
customer or an authorized requester.
Facts
Petitioner is engaged in the business of collecting and furnishing healthcare information to
persons requesting copies of medical records. Petitioner enters into agreements with various
healthcare provider customers (e.g., medical practices and hospitals). These agreements require
Petitioner to respond on behalf of the healthcare provider customer to all requests for medical records,
data, and information relating to particular patients (collectively, “Medical Records”) that are made
by or for patients, insurance companies, physicians, other healthcare providers, federal and state
organizations, and others. In turn, when a healthcare provider customer receives a request for
Medical Records, the customer is obligated to refer the requester to Petitioner. Currently, Petitioner
has operations at various medical facilities in New York and collects sales tax on its charges for
retrieving and furnishing medical records.
Petitioner’s employees at the healthcare provider customer’s medical facilities perform the
following duties:
•

•
•

Receive and review all incoming requests for Medical Records and validate authorizations for
release of medical records from requesters for compliance with the Health Insurance
Portability and Accountability Act (HIPAA) and state law and/or request follow-up
information as necessary to validate an invalid authorization. Petitioner may reject a request,
for example, if fulfillment would violate federal or state laws.
Make the medical record available to the requester, either by mailing a hard copy, or by giving
the requester password access to the record on Petitioner’s online e-delivery system.
Record pertinent information regarding the requests in Petitioner’s web-based information
request management system in order to track the status of the processing of requests.

The amount Petitioner charges the requester varies depending upon the quantity of medical
records requested, the type of information requested, and the form in which it is to be delivered.
When tangible records are mailed to a requester, Petitioner bills the requester for separately-stated
postage charges, which are invoiced as “postage and handling charges.” Another factor affecting the

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TSB-A-16(31)S
Sales Tax
December 2, 2016

amount of the charge is the identity of the requester, because certain state and federal laws limit the
amount that may be charged to certain categories of requesters.
In addition, Petitioner performs the following services:
•

•

•

•

Coding.
Coding is the transformation of narrative descriptions of diseases, injuries, and
healthcare procedures into numeric or alphanumeric designations (i.e., codes) that are
returned along with the Medical Records to the healthcare provider. The codes are
detailed in order to accurately describe the diagnoses and the procedures performed to
test or correct these diagnoses. Coding health-related data permits access to health
records according to diagnoses and procedures for use in clinical care, research, and
education.
Abstraction.
This service involves taking important medical information from handwritten and
typed reports and physically entering that information into an electronic medical
record. Petitioner hires nurses and other credentialed health information management
people to do this type of work.
Training and education for coding.
Training and education is provided for all levels of coders, including physicians and
ancillary hospital personnel. Petitioner’s wide range of education services includes
documentation improvement, inpatient and outpatient coding assessments and training,
and revenue cycle management.
Data Storage.
Petitioner provides customers secure, online storage space in which the customer can
store and access patient records and other sensitive documentation at any time. 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 its own server.

Analysis
Petitioner retrieves and furnishes specifically identified confidential medical records for its
customers. Petitioner provides the records to an authorized requester. This service is not subject to
sales tax.
See TSB-A-08(52)S; TSB-A-07(10)S; TSB-A-06(7)S; and TSB-A-92(7)S. Thus,
payments made to Petitioner by the medical practitioner customer or payments made by the requester
for this service are not subject to sales tax, including Petitioner’s delivery charges. The method of
transferring copies of the records to the requester, whether by mailing a printed copy or by electronic
means, does not change this result. See TSB-A-09(12)S.
Petitioner’s Coding Service adds additional information to the healthcare providers’ medical
records that the providers then can use and analyze. Accordingly, Petitioner's coding service is an
information service because it includes analyzing, compiling, and organizing information by
categorizing the original records and enabling searches within like diagnoses. See Tax Law §
1105(c)(1); 20 NYCRR § 527.3; see also Matter of ADP Automotive Claims Service Inc., Tax

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Sales Tax
December 2, 2016

Appeals Tribunal, August 8, 1991, aff’d 188 AD2d 245 (3d Dep't 1993). However, the codes
themselves are uniquely personal in nature because they reflect the diagnosis and treatment of a
particular patient. Cf. Matter of Allstate Ins. Co. v. Tax Commn. of the State of New York, 115 AD2d
831, 834 (3d Dep’t 1985), aff’d 67 NY2d 999 (1986). When Petitioner’s coding service is provided
solely to its healthcare provider customer or an authorized requestor, the service would be excluded
from sales tax as an information service that is “personal or individual in nature.” However, if the
coded information is provided to third parties, e.g., for research and education purposes, the charge
for the coding service would be taxable, because it would not satisfy the requirement that the
information “is not or may not be substantially incorporated in reports furnished to other persons.”
See Tax Law § 1105(c)(1).
Petitioner’s abstraction service does not qualify as an information service because Petitioner is
merely converting the customer’s handwritten or typed information into an electronic medical record
without adding any information or intelligence. See Finserv Computer Corporation v. Tully, 94
AD2d 197 (3d Dep’t 1984). This service is not taxable, whether the abstracted information is
delivered to the customer as tangible personal property or electronically. See TSB-A-10(20)S.
Any charges for the training provided by Petitioner to the coders, physicians or ancillary
hospital personnel are not taxable, because education services are not among the enumerated taxable
services. See Tax Law § 1105(c); TSB-A-15(7)S.
Finally, Petitioner’s data storage service is not subject to sales and use tax because the records
are stored in electronic form. See TSB-A-05(40)S.

DATED: December 2, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts
set forth therein and is binding on the Department only with respect to the person or entity
to whom it is issued and only if the person or entity fully and accurately describes all
relevant facts. An Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific time period at issue
in the Opinion. The information provided in this document does not cover every situation
and is not intended to replace the law or change its meaning.