Texas Governor Signs Bill Exempting Medical Billing Services from Sales Tax

Medical professionals have been holding their breath over the last several years as the Texas Comptroller’s attempt to make medical billing services subject to state sales tax was delayed several times. We can now all breath a little more easily. Texas Governor Greg Abbott has signed HB 1445 into law, making medical or dental billing services exempt from sales tax. For clarification purposes, the statute defines medical or dental billing services as “assigning codes for the preparation of a medical or dental claim, verifying medical or dental insurance eligibility, preparing a medical or dental claim form for filing, and filing a medical or dental claim”.

In 2002, the state Comptroller’s office defined medical billing services as not being taxable. That definition changed in November 2019. The Comptroller published a notice stating that it was going to treat medical billing services as taxable “insurance services”. October 2021 is the most recent effective date due to delays. The new law removes this date from the table for many.

The Comptroller’s office might come back and in an attempt to narrow the definition of medical or dental billing services. This could make some service pieces still subject to sales tax effective October 2021. Be sure to consider the full services your medical billing company offers. Be aware of any which fall outside the legislative definition of “medical or dental billing services”. You could still be paying additional sales tax later this year.

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