Is an out-of-state company's electronic medical-billing service subject to Kansas sales or use tax?

Plain-English summary

A medical provider contracts with an out-of-state company to prepare its medical billings. That company prepares the billings electronically and submits them electronically to the insurance companies — no paper invoices are generated — and then bills the provider for the service. The provider asked whether those charges are subject to Kansas sales or use tax.

The Department said the service, which does not involve the production of any paper invoice, is not subject to Kansas sales or use tax. Kansas taxes sales of tangible personal property and certain enumerated services; because this billing process produces no tangible personal property, the charge is for a nontaxable service.

What this means for you

Providers buying billing and back-office services

A purely electronic billing service that generates no paper product is a nontaxable service in Kansas. Watch for the distinction: if a vendor produces and delivers tangible items (like printed invoices or statements), the analysis can change.

Service vendors

Keeping the deliverable fully electronic — no printed output — supports nontaxable treatment of the service in Kansas.

Common questions

Q: Is an electronic medical-billing service taxed in Kansas?
A: No. With no paper invoice produced, it is a nontaxable service for Kansas sales and use tax.

Q: Would it matter if paper invoices were printed?
A: The Department emphasized that no paper invoice is produced here; producing tangible property could change the result.

Citations and references

• Nontaxable service — the Department advised that "the service you have described above (which does not involve the production of any paper invoice) is not subject to Kansas sales or use tax." The ruling cites no specific statute section.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2005-019

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

July 7, 2005

XXXX
XXXX

Re: Private Letter Ruling Request

Dear XXXX:

You indicate that XXXX contracts with an out-of-state company to prepare its medical billings for patient treatment. The out-of-state company prepares these billings electronically and submits them electronically to the appropriate insurance companies. No paper invoices are generated. The out-of-state company then bills XXXX for this service. You ask whether the charges for this service are subject to Kansas sales or use tax.

Please be advised that the service you have described above (which does not involve the production of any paper invoice) is not subject to Kansas sales or use tax.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

If you have additional questions, please let me know.

Very truly yours,

Richard L. Cram

Date Composed: 07/08/2005 Date Modified: 07/08/2005

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