State comptroller moves to stop charging sales tax on electronic medical record systems and patient portals

Texas doctors' offices and other health care providers may soon stop paying sales tax on the software they use to keep and share patient records, under a rule change the state's tax collector set in motion Tuesday.

Comptroller Don Huffines signed Executive Order DH-2026-02 on Oct. 6. It directs his agency to file a proposed amendment to the state rule on taxable information services so that charges for electronic health record systems, electronic medical record systems, patient portals and similar technology used to keep, view or share medical records are taxed as neither information services nor data processing services.

Not final yet

Although Huffines' announcement said he "ends" the tax, the order itself starts a rulemaking. The proposal must be published in the Texas Register, followed by a public comment period of at least 30 days, and then go through the process the state's Administrative Procedure Act requires.

Texans, health care providers and others can send comments during that window, and the order says agency staff must review and consider them.

The order also tells the agency's tax staff to check related rules and guidance and recommend any changes needed so that medical records technology is treated the same way across the agency.

The reasoning

The order says the Legislature put sales tax on data processing services in 1987, for mainframe computers and data entry, not for the cloud-based systems doctors and patients use now. It says record systems have been taxed under a rule adopted by earlier comptroller leadership, so patients could face sales tax just to see their own information.

Huffines said he heard about the issue at a roundtable last month, where physicians told him they were paying sales tax to open the electronic records of their own patients.

"No Texan should have to pay a tax to see their own medical records," Huffines said in a statement. He argued that a comptroller cannot create taxes through interpretation, and that the change would not cost the state because the money "should never have been collected in the first place."

The announcement did not estimate how much tax the change would save providers or how much revenue the state would forgo.

The order is part of what Huffines calls his Taxpayer First Project. His office said that last week it also ended what it called a double tax on marketplace fees charged when Texans order food, book rides or shop online, and that more changes to how data processing and information services are taxed may follow.

Sources

State of Texas

State of Texas