Does a law firm owe sales tax on a record-retrieval service's fees for obtaining its clients' own confidential medical and financial records?

Plain-English summary

Weitz & Luxenberg, a mass-tort and personal-injury law firm, hires a record-retrieval service (RRS) to obtain its clients' medical, psychological, tax, and Social Security records to build litigation cases. RRS doesn't investigate or analyze anything — the client signs an authorization form, and RRS simply requests and delivers copies of records from institutions the firm has already identified. RRS charges a mix of flat request-preparation, custodian, shipping, and per-page fees.

The Department found this service falls into a gap between two potentially taxable categories, escaping both. It's not a taxable "information service" under § 1105(c)(1) because that provision specifically excludes information that's "personal or individual in nature" and not incorporated into reports sold to other people — RRS is fetching one specific client's own confidential records, not compiling or selling general information. It's also not a taxable "detective service" under § 1105(c)(8), because RRS performs no investigation; the firm and client hand it everything it needs (the exact source and signed authorization) rather than RRS tracking anything down on its own.

The Department drew a clear boundary, though: this exemption is specific to retrieving an IDENTIFIED person's own confidential records. Selling GENERAL or statistical information compiled from medical files (not tied to a specific patient), or information pulled from publicly available databases, would be a taxable information service instead. And regardless of the underlying retrieval service, a separately stated charge for producing ADDITIONAL COPIES of the records is a taxable sale of tangible personal property.

What this means for you

Law firms using record-retrieval services

Straightforward record-retrieval fees — for obtaining a specific client's own confidential records via signed authorization — generally aren't subject to sales tax. But watch your invoices: any line item specifically for extra copies is taxable, separate from the retrieval fee itself.

Record-retrieval and litigation-support companies

The key distinguishing facts here are (1) you're retrieving records for one identified, authorized individual, not compiling or reselling general/statistical data, and (2) you're not doing any investigative work — the client and their attorney supply the source and the authorization. If your service starts to look more like locating unknown sources or compiling market-wide data, the analysis changes.

Accountants and tax professionals

This ruling is a useful boundary-marker between the personal-information carve-out in § 1105(c)(1) and the detective-services tax in § 1105(c)(8) — both turn on whether the service is retrieving an identified individual's own records versus investigating or compiling information more broadly.

Common questions

Q: Is a record-retrieval service's fee for getting a client's own medical records taxable?
A: No, when it's limited to retrieving specifically identified, client-authorized confidential records and doesn't involve investigation.

Q: Are charges for extra copies of retrieved records taxable?
A: Yes — a separately stated charge for additional copies is a taxable sale of tangible personal property.

Q: Would selling aggregated or public-database medical information be treated the same way?
A: No. General, non-patient-specific information or information from publicly available sources would be a taxable information service.

Q: Can another law firm or retrieval service rely on this Advisory Opinion?
A: No. It binds the Department only for the petitioner and facts described here.

Citations and references

Statutes and case law:

• Tax Law § 1105(a), (c)(1), (c)(8)
• Matter of Hooper Holmes v Wetzler, 152 AD2d 871, lv den, 75 NY2d 706

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2006.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_7s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-06(7)S
Sales Tax
March 3, 2006

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S050214B

On February 14, 2005, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Weitz & Luxenberg, P.C., 180 Maiden Lane, 17th Floor, New York,
New York, 10038. Petitioner, Weitz & Luxenberg, P.C., provided additional information
pertaining to the Petition on March 24, 2005.
The issue raised by Petitioner is whether the record-retrieval services purchased by
Petitioner, as described below, are subject to sales and use tax.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a law firm located in New York City with offices throughout the United
States. Petitioner is a mass torts, product liability, and personal injury law firm involved in state
and national litigation involving asbestos, breast and hip implants, drug recalls, personal injury,
and medical malpractice.
Petitioner hires a record-retrieval service (RRS) to obtain medical records, psychological
records and other confidential personal information of Petitioner’s clients for Petitioner’s use in
conducting its legal activities on behalf of its clients. The information provided consists of
protected medical records and other confidential information that is not available from any
publicly accessible source. RRS performs no investigatory services for Petitioner. RRS merely
requests copies of records from medical institutions or other organizations selected by Petitioner
and provides such institutions and organizations with the appropriate release authorizations from
Petitioner’s clients. RRS then provides Petitioner with copies of retrieved records.
Most of Petitioner's clients claim to be injured in some way. Many also claim a loss of
wages, earnings, and income as a result of their injuries. In order to develop a client's case,
Petitioner needs access to the client's medical history, records, and other medical information and
may also need copies of medical bills, tax returns or similar information. If Petitioner's client
does not have copies of all needed records, Petitioner hires RRS to obtain these documents on
behalf of Petitioner’s clients. The only services purchased by Petitioner from RRS are record­
retrieval services. In no event is Petitioner charged by RRS for compiling, studying, reviewing,
or analyzing the requested records.
Generally, RRS is hired to obtain copies of medical or psychological records of
Petitioner's clients. Occasionally, RRS is also hired to obtain copies of confidential financial
information from taxing authorities (i.e., tax returns) or the Social Security Administration. RRS
only requests records from sources selected by Petitioner.

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Sales Tax
March 3, 2006

In order to obtain medical records on behalf of Petitioner's clients, RRS is required to
follow federal regulations which specify that medical institutions are prohibited from disclosing
a patient's medical records unless Petitioner's client signs a medical authorization form that
complies with the requirements set forth in the federal regulations. The medical authorization
forms used by Petitioner and RRS authorize RRS to obtain copies of all "protected medical
information" specified on the form on behalf of the client, including the following:
•
•
•
•
•
•

records relating to any inpatient, outpatient or emergency room treatment;
clinical charts, reports, correspondence, test results, hand-written notes, etc.;
copies of all radiology films, mammograms, CT Scans, MRIs and bone
scans;
any and all pharmacy or prescription information or records;
information related to the client's history of alcohol or substance abuse,
psychiatric treatment, HIV/AIDS testing records, etc.; and
copies of all medical bills.

Once the medical authorization form is obtained by RRS from Petitioner, RRS will
approach the various medical institutions or other sources selected by Petitioner to obtain copies
of the client's records on behalf of the client.
Petitioner's client may also be required to provide authorization to RRS to enable RRS to
obtain copies of the client's tax returns from the IRS or state tax departments. RRS cannot obtain
copies of the client's tax returns unless the client (or spouse, if a joint return was filed) signs a
form authorizing the IRS or a state tax department to release copies of the client’s tax documents
or transcripts of such documents to RRS. Once this form is completed, RRS requests copies of
the client's filed tax returns from the IRS or state tax department. A similar authorization form is
required in order to allow RRS to obtain a copy of a client's confidential Social Security
Statement from the Social Security Administration.
If RRS is successful in obtaining records from the sources requested by Petitioner, copies
are provided to Petitioner. Petitioner is charged a flat record request preparation fee for the
preparation of the request by RRS whether or not RRS actually retrieves any records, a record
custodian fee, a shipping and handling fee, a record received fee based on the number of pages
copied by RRS, and, where applicable, a long distance or contact charge, a correspondence fee,
courier charges, and a pathology or radiology fee based on the number of these documents
copied. If no records are obtained by RRS, Petitioner is still charged the flat record request
preparation fee, applicable long distance and shipping and handling fees and a “no record”
statement fee by RRS for its attempt to obtain the records. Petitioner is separately billed by RRS
for each record request. Each bill references the particular client or case to which Petitioner's
request refers.

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Sales Tax
March 3, 2006
Applicable law
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby imposed
and there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
(1) The furnishing of information by printed, mimeographed or multigraphed
matter or by duplicating written or printed matter in any other manner, including the
services of collecting, compiling or analyzing information of any kind or nature and
furnishing reports thereof to other persons, but excluding the furnishing of information
which is personal or individual in nature and which is not or may not be substantially
incorporated in reports furnished to other persons . . . .
*

*

*

(8) Protective and detective services, including, but not limited to, all services
provided by or through alarm or protective systems of every nature, including, but not
limited to, protection against burglary, theft, fire, water damage or any malfunction of
industrial processes or any other malfunction of or damage to property or injury to
persons, detective agencies, armored car services and guard, patrol and watchman
services of every nature other than the performance of such services by a port watchman
licensed by the waterfront commission of New York harbor, whether or not tangible
personal property is transferred in conjunction therewith.
Opinion
Petitioner is a law firm that, in the course of conducting its legal activities on behalf of its
clients, hires a record-retrieval service (RRS) to obtain its clients' medical records, psychological
records and other confidential personal information. The records provided consist of protected
medical records and other confidential information that is not available from any publicly
accessible source. Such records cannot be obtained by RRS unless the appropriate release
authorizations have been signed by the person to whom the records pertain. The authorization
forms are provided by RRS to the medical institutions or other sources selected by Petitioner to
enable RRS to obtain copies of the client's records on behalf of the client and Petitioner.

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TSB-A-06(7)S
Sales Tax
March 3, 2006

The service of obtaining copies of specific, individual records from medical practitioners
and other sources and providing such copies to Petitioner does not rise to the level of a protective
or detective service as described in section 1105(c)(8) of the Tax Law since Petitioner and its
client furnish RRS with all information needed to locate the particular records as well as the
appropriate legal authorizations RRS needs to retrieve such records. RRS is precluded from
seeking records which Petitioner’s client has not specifically authorized RRS to retrieve.
Therefore, RRS is not performing detective activities for Petitioner. Rather, this activity
constitutes the service of retrieving and delivering client-specific records.
To the extent that RRS is retrieving specifically identified confidential records on behalf
of Petitioner’s client, which records contain confidential information pertaining to the client,
RRS’s services are not services subject to sales tax under section 1105(c)(1) of the Tax Law.
See Immediate Medical Records, Inc., Adv Op Comm T & F, January 31, 1992, TSB-A-92(7)S.
RRS can only get these records by approaching the specific medical institutions where
Petitioner's client has obtained medical treatment, or by approaching other institutions
maintaining client records, and presenting the appropriate authorization forms signed by the
client whose records are being sought. If a medical practitioner or other source provides RRS
with copies of specific confidential records at no charge or for an administrative fee, the service
provided by RRS to Petitioner of retrieving such records is not subject to sales tax under section
1105(c) of the Tax Law. Similarly, it would appear that an administrative fee charged by the
custodian of the client records for retrieval of such documents which are deposited, filed or
maintained by the custodian, whether or not including a certification thereof, constitutes neither
the sale of tangible personal property taxable under section 1105(a) of the Tax Law nor the sale
of a service taxable under section 1105(c) of the Tax Law.
Although the sale of general information, which does not identify specific patients,
transcribed from files of medical practitioners, or the sale of analyses of statistical or generic (not
patient-specific) information gleaned from medical files might be considered the sale of a taxable
information service under section 1105(c)(1) of the Tax Law, obtaining such information is
clearly distinguishable from the service of obtaining exact copies of an identified patient’s
confidential records. In addition, the sale of information derived from records that are generally
available to the public is distinguishable from the present case. The sale of such public database
information would be taxable under section 1105(c)(1) of the Tax Law. See Matter of Hooper
Holmes v Wetzler, 152 AD2d 871, lv den, 75 NY2d 706; State Farm Mutual Automobile
Insurance Co., Adv Op Comm T & F, December 28, 2004, TSB-A-04(29)S. However, under the
facts of this Advisory Opinion, RRS is retrieving copies of identified client-specific confidential
records on behalf of Petitioner’s client for delivery to Petitioner and is not obtaining information
that is generally available to the public. A charge to Petitioner by RRS for merely obtaining
copies of confidential medical records or other confidential records from a medical practitioner
or other custodian and furnishing those records to Petitioner’s place of business on behalf of
Petitioner’s client is not subject to sales tax.

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Sales Tax
March 3, 2006

However, a separately stated charge by RRS for making additional copies of records
constitutes a receipt from the sale of tangible personal property subject to sales tax under section
1105(a) of the Tax Law.

DATED: March 3, 2006

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.