If our medical practice charges patients, insurers, or attorneys for copies of medical records, do we owe Texas sales tax on that charge?

Plain-English summary

This 1996 letter clarifies the Comptroller's earlier guidance (from an October 11, 1994 letter) on whether charges for copying medical records are subject to Texas sales tax. The answer turns on who the copies are being made for and why.

When a medical service provider charges for copies of medical records as part of its professional service, that charge is not taxable -- even if the provider hires a third-party copying service to actually make the copies. The letter gives three examples of non-taxable situations: charging a patient (or the patient's authorized agent) for copies of their own records, charging for copies of records subpoenaed for a trial or lawsuit, and selling copies to an insurance carrier settling a claim. In these cases, the medical provider may accept an exemption certificate from the purchaser instead of collecting tax.

The result flips, though, when the medical provider is the one buying or using the copying service for its own internal purposes rather than selling the copies onward. If a provider hires a copying service to reproduce records for internal need, or to convert paper records to microfiche, film, or an electronic format, tax is due on that reproduction charge.

What this means for you

Medical practices, hospitals, and clinics

Charges you bill to patients, their agents, litigants (via subpoena), or insurance carriers for record copies are not subject to sales tax, even if you outsource the copying. You can accept an exemption certificate from the purchaser in lieu of collecting tax on those sales.

Providers using outside copying/imaging vendors for internal recordkeeping

If you hire a copying service to reproduce records purely for your own internal use -- not to sell or provide to a patient, insurer, or litigant -- or to convert paper files to microfiche, film, or electronic format, tax applies to that charge. You are the end consumer of that service in that scenario.

Accountants and tax professionals

The key distinction is whether the medical records are being sold (as part of the provider's professional service to a patient, agent, insurer, or litigant) versus purchased/used by the provider itself for internal purposes. The former is exempt; the latter is a taxable purchase of a copying/reproduction service.

Common questions

Q: Do we have to charge sales tax when we bill a patient for copies of their medical records?
A: No. Per this letter, that charge is not taxable because it's part of the provider's professional service, even if a third-party copying company makes the actual copies.

Q: What if we're just responding to a subpoena or an insurance company's request for records?
A: Also not taxable -- the letter specifically lists subpoenaed records for a trial/lawsuit and sales to an insurance carrier settling a claim as non-taxable examples.

Q: What if we hire a company to convert our old paper charts to microfiche or an electronic format for our own files?
A: That is taxable. Tax is due on the charge because the provider is purchasing/using the reproduction service for internal purposes rather than selling copies to a patient or other outside party.

Citations and references

No statutes or administrative rules are cited by name in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9605L1409B13

Original ruling text

May 13, 1996

Dear ****:

Thank you for your recent letter regarding the sale of medical records. This
letter is to clarify my correspondence of October 11, 1994. I apologize for
any inconvenience I have caused you.

The sale of medical records by a medical service provider is not taxable when
the medical records are provided as part of the service provider's professional
service. This is true even if the medical service provider contracts with a
third-party copying service to make the copies sold. Examples include, charges
to copy medical records for a patient or his/her authorized agent, charges to
copy medical records subpoenaed for use in a trial or lawsuit, or sales to an
insurance carrier settling a claim. You may accept an exemption certificate
from the purchaser in lieu of collecting tax on these sales.

If you contract with a medical service provider to make copies of medical
records that are not sold, but rather are purchased or used by the medical
service provider, tax is due on the charge to reproduce the medical records.
For example, if a medical service provider has an internal need to reproduce
medical records, the medical service provider owes tax on the copies it
purchases unless otherwise exempt. Or, if a medical service provider converts
paper documents to microfiche, film, or an electronic format, tax is due on
the charge to reproduce the documents.

This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 5-0037. The direct line is
512/475-0037. You also may write to Sales Tax Policy Division, Comptroller of
Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division

NOTE: Previous Accession Number 9605199L