United States

Sales tax on Texas medical billing services quickly approaching

INSIGHT ARTICLE  | 

Reminder: The Texas comptroller of public accounts has announced that the effective date for treating medical billing services as taxable insurance services begins April 1, 2020.

The Comptroller had issued guidance stating that medical billing services are subject to sales and use tax as insurance services. Those taxable services include those performed prior to submitting a claim to an insurance company, to provide additional information, or to adjust a submitted billing. The original effective date for this interpretation of the law was Jan. 1, 2020. In November, the Comptroller extended the effective date until April 1, 2020.

The Comptroller’s guidance interprets Texas Code Section 151.0101 which includes “insurance services” in the list of services subject to sales and use tax. Under Section 151.0039 insurance services are defined “insurance loss or damage appraisal, insurance inspection, insurance investigation, insurance actuarial analysis or research, insurance claims adjustment or claims processing, or insurance loss prevention service.” Additionally, the statutory authorization subjecting insurance services to the sales and use tax never excluded medical billing. The Comptroller concluded that medical billing services to prepare a medical insurance claim for filing constitute insurance claims adjustment or claims processing. Thus, medical billing services are subject to the sales and use tax as insurance services.

Takeaways

Taxpayers providing medical billing services may be aware that the treatment of those services is a reversal from prior, and long-standing, Comptroller policy. Medical billing service providers must be prepared to register for the sales and use tax, if not already, and charge, collect, and remit the proper tax to the state by the April 1 deadline.

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