- The Texas Comptroller has directed a proposed amendment to Rule 3.342 that would exclude specified medical record technology from taxable information services and data processing services.
- The proposed relief covers electronic health record systems, electronic medical record systems, patient portals, and other healthcare technology used to maintain, access, or share medical records.
- Healthcare organizations and technology providers should continue following current law while reviewing affected charges, preserving records, evaluating potential refund opportunities, and monitoring the rulemaking process.
These Key Takeaways were generated by AI and reviewed by a BDO professional.
The Texas Comptroller has signed an executive order directing the publication of a proposed amendment to Texas Rule 3.342. The contemplated language would clarify that electronic health record systems, electronic medical record systems, patient portals, and other healthcare technology systems used to maintain, access, or share medical records are not taxable information services or data processing services.
Current Treatment
Under 34 Tex. Admin. Code §3.342 (Rule 3.342), information services are taxable. The rule defines taxable information services to include furnishing general or specialized news or other current information and electronic data retrieval or research, and it provides that 80% of the charge for a taxable information service is subject to Texas sales tax. Medical record technology can be taxable if it qualifies as a service covered by the rule.
Proposed Treatment
The proposed amendment would clarify that charges for the following medical record technologies are not taxable information services or data processing services:
- Electronic health record (EHR) systems;
- Electronic medical record (EMR) systems;
- Patient portals; and
- Other healthcare technology systems used to maintain, access, or share medical records.
The proposed amendment must be filed with the Texas Secretary of State and published in the Texas Register, followed by a 30-day public comment period. Until a final rule takes effect, taxpayers should follow current law and retain relevant contracts, invoices, tax records, and transaction data.
Potential Business Impact
If adopted, the amendment to Rule 3.342 could affect healthcare organizations and technology providers that purchase, sell, or provide access to medical record systems. Potential areas of impact include:
- Reducing sales or use tax on qualifying medical-record technology charges;
- Revising tax determinations, billing settings, and use tax accrual procedures;
- Reviewing contract and invoice descriptions to separate qualifying medical-record functions from other services; and
- Assessing potential prior-period refund opportunities, subject to the final rule and applicable procedures.
Why This Matters
The announcement follows the Comptroller’s recent direction to reconsider the taxation of some marketplace fees (see our related Alert). The Comptroller characterized both developments as corrections to interpretations that extended older tax rules to modern technology in ways not authorized by the Legislature.
The Comptroller’s office has said it also plans to continue reviewing how the state taxes information and data processing services and might propose further changes. Businesses that buy or provide technology-enabled services should monitor any developments and assess their potential effect on existing Texas sales tax positions.
BDO Insights
- Healthcare organizations and technology providers should assess the proposal now while continuing to follow current law until any change takes effect.
- Reviewing contracts, invoices, general ledger accounts, taxability matrices, and system configurations can identify affected charges and quantify potential costs or savings.
- Businesses with significant EHR, EMR, patient portal, or related technology costs should consider a targeted Texas sales and use tax review to assess compliance, identify potential refunds, and prepare for implementation of a final rule.
- Potentially affected taxpayers should consider participating in the 30-day public comment period that begins once the proposed amendment is published in the Texas Register.
Please visit BDO’s State & Local Tax Services and Sales & Use Tax pages for more information on how BDO can help.