Practice Management

Texas to Implement Sales tax for Medical Billing Services

HBMA is working on behalf of members in response to the recent announcement by the Texas Comptroller that "medical billing services" will be subject to the state and local sales taxes (up to 8.25% combined) effective January 1, 2020. It is our understanding that the tax will be applied to: 1. medical billing/RCM companies located in Texas, and 2. medical billing/RCM companies located in other states that support clients in Texas. Additional background information is below.

We are working to delay implementation of this opinion and ultimately overturn it. We need the support and engagement of HBMA members to have an impact. If you want to support this effort, please let us know who are the best people in your company to receive updates and coordinate activities.

HBMA Action 

• HBMA is working to gain greater understanding about this policy change to answer a list of questions raised by the brief opinion from the Texas Comptroller.
• HBMA submitted a Public Information Act Request (a.k.a. FOIA request) for documentation on the decision to make medical billing services subject to the sales tax.
• HBMA wants to coordinate a meeting between HBMA/members and the Texas Comptroller.
• HBMA is willing to help to coordinate member companies who may be considering legal action, such as an injunction again implementation of the sales tax.
• HBMA is in communication with other associations whose members are/may also be affected. We expect a coalition of organizations will come together in opposition to this new policy.

Understanding of Impact

• HBMA members operating in Texas or serving clients in Texas will incur the burden and cost of administering collection of the tax and payment to the Texas Comptroller.
• Payment of the tax is the responsibility of the physician, but if they have their own billing office there is no tax.
• The tax burden is on the provider. If they use an out of state billing company and the vendor doesn't collect and pay the state the physician group is still responsible for paying the tax.
• ERISA plans and patient services are not taxed. However, the cost to code a claim, file it to a clearinghouse or carrier, and post the payment is taxable. If you perform credentialing or contracting services those are also taxable.
• That outsourced billing to an overseas entity is not taxable which unfairly affects those companies that are based in the states.

Background Information
On Nov. 22, 2019, the Texas Comptroller of Public Accounts announced a new agency opinion that medical billing services are subject to the state sales tax. It does not appear the opinion was prompted by legislative action or rule making. The announcement appeared without any warning or opportunity to for the public to provide comment. The text of the announcement is available on the website of the Texas Comptroller.

In 2002 a number of HBMA members in Texas mobilized to exempt medical billing services from sales taxes after they were subject to sales taxes for a period of time. It is unclear what prompted the sudden change in policy by the Texas Comptroller to subject medical billing services to sales taxes effective January 1, 2020.

Copyright © 2017 The Healthcare Business Management Association (HBMA), All rights reserved.
You are recieving this email as a benefit of your membership with HBMA.

Our mailing address is:
The Healthcare Business Management Association (HBMA)
2025 M Street NW
Suite 800
Washington, DC 20036


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Texas to Implement Sales tax for Medical Billing Services

HBMA is working on behalf of members in response to the recent announcement by the Texas Comptroller that "medical billing services" will be subject to the state and local sales taxes (up to 8.25% combined) effective January 1, 2020. It is our understanding that the tax will be applied to: 1. medical billing/RCM companies located in Texas, and 2. medical billing/RCM companies located in other states that support clients in Texas. Additional background information is below.

We are working to delay implementation of this opinion and ultimately overturn it. We need the support and engagement of HBMA members to have an impact. If you want to support this effort, please let us know who are the best people in your company to receive updates and coordinate activities.

HBMA Action 

• HBMA is working to gain greater understanding about this policy change to answer a list of questions raised by the brief opinion from the Texas Comptroller.
• HBMA submitted a Public Information Act Request (a.k.a. FOIA request) for documentation on the decision to make medical billing services subject to the sales tax.
• HBMA wants to coordinate a meeting between HBMA/members and the Texas Comptroller.
• HBMA is willing to help to coordinate member companies who may be considering legal action, such as an injunction again implementation of the sales tax.
• HBMA is in communication with other associations whose members are/may also be affected. We expect a coalition of organizations will come together in opposition to this new policy.

Understanding of Impact

• HBMA members operating in Texas or serving clients in Texas will incur the burden and cost of administering collection of the tax and payment to the Texas Comptroller.
• Payment of the tax is the responsibility of the physician, but if they have their own billing office there is no tax.
• The tax burden is on the provider. If they use an out of state billing company and the vendor doesn't collect and pay the state the physician group is still responsible for paying the tax.
• ERISA plans and patient services are not taxed. However, the cost to code a claim, file it to a clearinghouse or carrier, and post the payment is taxable. If you perform credentialing or contracting services those are also taxable.
• That outsourced billing to an overseas entity is not taxable which unfairly affects those companies that are based in the states.

Background Information
On Nov. 22, 2019, the Texas Comptroller of Public Accounts announced a new agency opinion that medical billing services are subject to the state sales tax. It does not appear the opinion was prompted by legislative action or rule making. The announcement appeared without any warning or opportunity to for the public to provide comment. The text of the announcement is available on the website of the Texas Comptroller.

In 2002 a number of HBMA members in Texas mobilized to exempt medical billing services from sales taxes after they were subject to sales taxes for a period of time. It is unclear what prompted the sudden change in policy by the Texas Comptroller to subject medical billing services to sales taxes effective January 1, 2020.

Copyright © 2017 The Healthcare Business Management Association (HBMA), All rights reserved.
You are recieving this email as a benefit of your membership with HBMA.

Our mailing address is:
The Healthcare Business Management Association (HBMA)
2025 M Street NW
Suite 800
Washington, DC 20036


Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list