Controversial Tax Can Hurt Physician Practices, TMA Tells Texas Comptroller
By Alisa Pierce

The state’s tax of data processing services unfairly impacts physician practices, the Texas Medical Association contends, bringing that concern to a roundtable discussion hosted by Texas Comptroller Don Huffines Sept. 3.

The meeting was part of the comptroller’s ongoing Taxpayer First Project, and featured input from a number of stakeholders, including online marketplace sellers, restaurant owners, and physicians on how the tax affects their businesses.

“The fact that medicine was even in that discussion shows tremendous respect for physicians and the contributions that we make to health care in our state,” said San Antonio radiologist Ezequiel “Zeke” Silva III, MD, who was invited to the roundtable as a representative of TMA. “When the comptroller thinks about what’s happening with doctors, the first acronym in his mind needs to be TMA. Our job is to be there.”

Texas rules broadly define a data processing service, in part, as “the computerized entry, retrieval, search, compilation, manipulation, or storage of data or information” in addition to several examples of what does, and what does not, constitute a data processing service. Under the law, cloud-based electronic health record (EHR) fees to set up, store, back up, manage, and retrieve patient records are taxable.

The current rule is very detailed and advice from a tax consultant is always encouraged, especially considering that the tax can potentially amount to thousands of dollars per practice, Dr. Silva says.

Texas crafted the first iteration of the sales and use tax on data processing services in 1987, Dr. Silva points out, a time when the internet and most modern digital services – including EHRs – did not exist.

“Think about how much medicine has changed since 1987. It has since become a very, very data-centric profession,” the member of TMA’s Board of Trustees said. “These are core clinical functions to what we do. When we see a patient, part of the clinical encounter absolutely involves consulting and reviewing data.”

Dr. Silva argued the tax drives up Texas physicians’ practice expenses and can raise health care costs for patients as those expenses are factored in the overall price of care.

“I’d much rather take the money I’m paying in taxes and put that back into patient care,” he added.

In a statement, Comptroller Huffines said the roundtable feedback will inform how the state evaluates the data processing services tax. TMA is in communication with the comptroller’s office on next steps, whether through rulemaking or legislative action.

“Doctors are being charged a tax to access the electronic medical records of their own patients. That drives up the cost of health care in Texas,” Comptroller Huffines said. “After listening to these hard-working Texans, it is clear we need a comprehensive review of how this tax is applied.”

TMA is asking physicians to share how the tax impacts their practices, without disclosing protected patient health information, by emailing TMA lobbyist Matt Dowling. For more on TMA’s state advocacy, see the association’s dedicated webpage.

DISCLAIMER NOTICE: This information is provided as general information and is not intended to provide advice on any specific legal matter. This information should NOT be considered legal or tax advice and receipt of it does not create an attorney-client relationship. This is not a substitute for the advice of an attorney or other professional. The Office of the General Counsel of the Texas Medical Association (TMA) provides this information with the express understanding that (1) no attorney-client relationship exists, (2) neither TMA nor its attorneys are engaged in providing legal advice, and (3) the information is of a general character. Although TMA has attempted to present materials that are accurate and useful, some material may be outdated, and TMA shall not be liable to anyone for any inaccuracy, error or omission, regardless of cause, or for any damages resulting therefrom. You should not rely on this information when dealing with personal legal and/or tax matters; rather advice from retained legal or other appropriate counsel should be sought. Also, this information contains third-party links that may bring you to a third party website, owned and operated by an independent party over which TMA  has no control (3rd Party Website). Any link you make to or from the 3rd Party Website will be at your own risk. The information herein is not a recommendation or endorsement of any entity, product, service, company, or business model and should not be referenced in any way to imply such approval or endorsement.