Ezel / Tax Rulings / TX
TX 9709711L Sales and/or Use Tax (State,Local,MTA) 1997-09-15

Is the fee charged to program a patient's medical history and insurance information onto a smart card subject to Texas sales tax?

Short answer: Yes. A programming fee — charged to load a patient's health and insurance information onto a credit-card-sized smart card with an embedded memory chip, readable by ambulances, hospital emergency departments, pharmacies, nursing homes, home health agencies, and doctors' offices — meets the definition of data processing, a taxable service under Rule 3.330. This holds even though there's no separate charge for the smart card itself, only the programming fee.

Apply this to your situation

This page answers the general question as of 1997. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1997
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A company asked about the taxability of programming a patient's medical history onto a "smart card" — a credit-card-sized card with an embedded computer memory chip carrying an individual's health and insurance information, readable at ambulances, hospital emergency departments, pharmacies, nursing homes, home health care agencies, and doctors' offices. The only charge to the patient/customer would be a programming fee; the smart card itself would not be separately charged for.

The Comptroller held that this service meets the definition of data processing, which is a taxable service under Rule 3.330 — so the programming fee is subject to Texas sales tax.

What this means for you

Health-technology and smart-card companies

Charging a fee to enter, format, and store data (like a patient's medical/insurance history) onto a smart card or similar device is taxable data processing, regardless of whether you separately charge for the physical card — the classification turns on the data-entry/manipulation service, not on whether hardware changes hands for a fee.

Common questions

Q: Is a fee to program medical data onto a smart card taxable?
A: Yes — it's taxable data processing under Rule 3.330.

Q: Does it matter that there's no separate charge for the smart card itself?
A: No — the programming fee alone is enough to make the service taxable.

Q: Can another company rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Citations and references

Rules:

  • 34 Tex. Admin. Code § 3.330 (data processing services)

Source

Original ruling text

September 15, 1997

Dear***:

Thank you for your letter dated September 10, 1997, concerning the taxability
of programming a patient's medical history onto a smart card.

The card is the size of a credit card and has a computer memory chip embedded
in it. The chip carries all of an individual's health and insurance
information which is then able to be read in the ambulances, emergency
departments of the hospitals, pharmacies, nursing homes, home health care
agencies and doctors' offices, etc.

The only fee charged will be a programming fee. There will be no charge for
the smart card.

Response: The service provided meets the definition of data processing, which
is a taxable service. See enclosed Rule 3.330.

Sales tax rules are available on the Internet
.

This opinion is based on the facts you submitted and current law. Other facts
though similar, may result in different answers.

If you have any questions or need more information, you may call me toll free
at 1-800-531-5441, ext. 50330. The direct line is 512/475-0330. You may also
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bettie Peterson
Tax Policy Division

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