Could the insurer buy equipment and telecommunications for resale when hospitals used its automated claims-submission and inquiry system?

Plain-English summary

The insurer charged hospitals for shipping and installing computer equipment, telephone lines, modems, terminals, paper, and printer ribbons used for electronic claims and insurance-coverage inquiries.

The submitted agreements did not show that the insurer rented the equipment, resold telecommunications, provided a taxable service, or collected tax from hospitals. On those facts, the insurer could not issue resale certificates for the equipment or services.

The answer was conditional: if the insurer actually provided a taxable information service under Rule 3.342, or leased circuit lines to customers without using them itself, it should separately state those charges and collect the proper tax.

Common questions

Did the agreements establish a rental or taxable resale? No.

When could the insurer issue a resale certificate? Only for taxable equipment or services bought strictly for resale, lease, or rental, or transferred as part of a taxable service.

What if the insurer sold taxable information or exclusively leased circuit lines? It had to separately state those charges and collect tax.

Citations and references

• 34 Tex. Admin. Code Rule 3.286(d)(3) (Seller's and purchaser's responsibilities)
• 34 Tex. Admin. Code Rule 3.342 (Information services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L0997A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 9, 1990

Dear ***:

Thank you for your letter dated January 19, 1990, and the
additional information that you sent January 26, concerning the
"automated claims submission and inquiry system" that Blue Cross
sells to hospitals.

According to "Attachment A Computer Terminal Lease" of the
"Agreement for Hospital Automatic Claims Submission and Inquiry"
that you sent, Blue Cross charges a hospital for the cost of
shipping and installing the equipment; operational costs for
telephone lines, modems, terminal(s); and paper and ribbons used
in the printer. There does not appear to be a charge for rental
of the equipment itself, nor is there any indication of sales tax
collected from the customer on items rented or sold (i.e., paper
and ribbons).

The documents that you submitted seem to indicate that Blue Cross
has agreed:

1) to accept certain claims submitted electronically by a
hospital using computer equipment

2) to supply certain data concerning Blue Cross' insurance
coverage of specific patients

Blue Cross may issue resale certificates for taxable equipment
and taxable services only if these items are purchased strictly
for sale, lease or rental to a customer or are transferred to the
customer as a part of a taxable service. The documents that you
submitted do not indicate that Blue Cross is renting equipment to
hospitals or reselling telecommunications services to hospitals
or providing taxable services or collecting tax from customers.

Please review section (d)(3) of the enclosed Rule 3.286 on
seller's and purchaser's responsibilities. If Blue Cross is
providing a taxable information service for its customers per Rule
3.342 or leasing the circuit lines to customers without making any
other use of the lines, then Blue Cross should separately state
those charges to the customers and collect the appropriate amount
of sales tax.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have any additional
questions. You may write me, call toll free 1-800-252-5555 (ext.
3-4685) from anywhere in the United States or phone 512/463-4685.

Sincerely,
Julie Pesl
Tax Correspondence