Texas Comptroller Moves to End Sales Tax on Medical Records Systems
An Oct. 6 executive order starts the process of removing sales tax from electronic health records and patient portals. The change is not final until rulemaking ends.
Texas doctors and clinics may soon stop paying sales tax on the software they use to keep patient records. Comptroller Don Huffines signed an executive order on Oct. 6 directing his office to stop treating electronic health records and related systems as taxable services, his office announced.
What would change
The order tells agency staff to propose an amendment to Rule 3.342, which governs how Texas taxes information services. Under the change, charges for these would be neither taxable information services nor taxable data processing services:
electronic health record (EHR) systems; electronic medical record (EMR) systems; patient portals; and other health care technology used to maintain, access or share medical records.
Law firm McDermott Will & Schulte has reviewed the order for health care clients. In his announcement, Huffines put the principle plainly: "A Comptroller doesn't get to arbitrarily rewrite the Tax Code. If it's not authorized in the law, it's not a tax."
"No Texan should have to pay a tax to see their own medical records," Huffines said.
Why now
Huffines said physicians at a roundtable last month told him they were being charged sales tax just to access their own patients' electronic records. Becker's Hospital Review covered the order.
The Legislature imposed the data processing tax in 1987, Becker's noted. The order is part of what Huffines calls his Taxpayer First Project, which a week earlier moved to end a data processing tax on marketplace fees.
Not final yet
This is the start of a process, not the end. The proposed rule amendment must be published in the Texas Register, followed by a 30-day public comment period, the comptroller's office said, and then go through the state's formal rulemaking steps. Until a final rule is adopted, the current tax treatment stands. The order also directs staff to review a related rule, Rule 3.330, so medical records technology is treated the same across agency rules.
Huffines is also the Republican nominee for comptroller on the Nov. 3 ballot, so voters will judge this record directly. Our explainer on state agencies covers what the comptroller's office does.
A fair principle
The rule here is a good one no matter who holds the office: taxes should come from the people's elected lawmakers, not from an agency's reading of old rules. A doctor should not pay a tax to look at his own patient's chart, and the patient should not pay it in the bill. Texans who agree or disagree will get their say during the comment period. For a wider look at the Texas economy, see our latest jobs report.
Hero photo: Larry D. Moore via Wikimedia Commons, CC BY 4.0, cropped and resized.
